John Lewis, the wholly employee owned retailer with a flagship store at Cheadle Royal in Stockport, has blamed increased competition and wage costs for a drop in pre-tax profits of 14.8%.
John Lewis – famously known for being ‘never knowingly undersold’ – reported a drop in operating profit of over 58%, to £113.7m for the first 6 months of 2016.
John Lewis have acquired property for Waitrose to the value of £25m although it is also reported that these properties will not open. The company have also shelved plans to improve existing stores.
John Lewis’s chairman, Sir Charlie Mayfield, said: “Our commitment to competitive pricing, excellent service, increasing pay and investing for the long term have held back profits. We expect the trading pressures to continue through this year and next. The EU referendum result … has had little quantifiable impact on sales so far. Instead there are far-reaching changes taking place in society, in retail and in the workplace that have much greater implications.
“Our ownership structure makes it especially important that we manage the Partnership carefully and thoughtfully for the long term and our plans anticipate the impact of these bigger changes. Evidence of that is already showing within these results and will become increasingly evident as we implement our long-term strategy.”
Although actual sales have risen by 3.1%, profit has fallen at both John Lewis Department Stores and sister company Waitrose.
However, during the year the company have also been investing in both its IT facility and distribution network.
John Lewis’s pension deficit increased by £512m due to falling yields on bonds used to fund the investment.