The John Lewis Partnership has recorded a fall in profits for the first half of its financial year, despite a boost in sales and increased customer numbers.
Profit before tax at the partnership, which runs upmarket grocery chain Waitrose and department store chain John Lewis, plummeted by 53.3 per cent to £26.6 million in the six months to July 29.
Meanwhile, operating profit slid by 39.3 per cent to £69 million.
Chairman Sir Charlie Mayfield said the profits were impacted by an exceptional charge of £56.4 million that was incurred from restructuring and redundancy costs as part of ongoing strategy plans for both Waitrose and John Lewis, as well as functional restructurings in finance, personnel and IT.
Meanwhile, profit before tax and exceptional items was down 4.6 per cent to £83 million in the same period.
“This was flattered by property profits and after excluding these it was down 17.2 per cent,” Mayfield said in the trading update.
Nonetheless, the partnership still recorded gross sales growth of 2.3 per cent to £5.39 billion, while revenue inched up by 2.2 per cent to £4.76 billion.
The partnership’s net debt also improved, now standing £421.2 million, £128.1 million lower than July 30 last year.
Mayfield said the overall results marked a “solid performance in a difficult market”.
“As we anticipated in our full year results statement in March, the first half of this year has seen inflationary pressures driven by exchange rates and political uncertainty,” he said.
“These have dampened customer demand, especially in categories connected to the housing market. Against that backdrop, our market share gains in fashion stood out.
“The exchange rate driven increase in cost prices has also put pressure on margin. We have chosen to hold back on increasing prices across many areas.
“Our results also reflect the acceleration of our strategy to ensure the Partnership‘s success in the future.”
On their own, half-year operating profit at Waitrose fell 8.5 per cent to £88.1 million while John Lewis’ dropped 10.2 per cent to £29.1 million.
However, gross sales at the two chains inched up. Waitrose raked in £3.32 billion, a 2.3 per cent increase, while John Lewis recorded £2.07 billion, a 2.3 per cent rise also.
Mayfield said he expected sales growth to continue into the second half, but warned that dampened consumer confidence and pension accounting charges would affect full-year profits.
“Sales growth has continued in the first few weeks of the second half. We are well set for our all-important seasonal peak, but we expect the headwinds that have dampened consumer demand and put pressure on margins to continue into next year,” he said.
“In addition, we will incur higher pension accounting charges in the second half year, as a result of low market interest rates. These will all impact our full year profits.”
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