The John Lewis Partnership has issued a warning ahead of its half-year results and announced the disposal of five Waitrose stores as a challenging market condition continues to take its toll.
The company said it expected half year profits before exceptional items to be “close to zero” this year.
However, it stressed that its first half results were “always much lower and more volatile” than the second half.
For the full year, the partnership said there could be “a wide range of possible outcomes”, but they were expecting profits before exceptional items would be “substantially” lower than last year.
Alongside market uncertainty, it explained that “significant extra costs” as a result of greater IT investment was set to be a “big driver” behind its overall profit change.
When looking at its Waitrose and John Lewis divisions separately, the partnership said it expected to see profit growth from the grocery arm and a decline in its department store arm.
However, four Waitrose convenience stores and one small supermarket are set to shut down, affecting around 200 staff.
Sir Charlie Mayfield, chairman of the John Lewis Partnership, warned that the malaise “isn’t a blip”.
“It is very important that we feel the jeopardy of what is happening right now,” he said during the partnership’s strategy day today.
“This isn’t a blip, it is a major shift and it has a while to run.”
The company reiterated that it has taken steps to strengthen its balance sheet by £750 million over the last three years to ensure the “necessary financial firepower” to invest while also reducing debt.
It also expects its cash position for this year to be in-line or ahead of last year and its liquidity position to be the best it has been for 10 years, allowing it to maintain investment at a rate of £400 million to £500 million a year.
“It is widely acknowledged that the retail sector is going through a period of generational change and every retailer’s response will be different. For the Partnership, the focus is on greater differentiation – not scale,” the partnership stated.
“We have clear plans to build on our strengths and to sharpen our points of difference in both Waitrose and John Lewis.”
British department stores have been enduring a tough year, with the partnership’s main competitors, Debenhams and House of Fraser, both announcing a profit warning and a CVA.