John Lewis chairman warns on Brexit as profits halve
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Sir Charlie Mayfield added his voice to a chorus of business leaders wading into the Brexit argument as fears mount that Britain will crash out of the European Union without a deal.
He said: “Brexit is having an impact on everyone, sterling is weaker and confidence is being affected.
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Hide Ad“There needs to be a serious parliamentary debate to find the best way forward for the country and the economy. The core principles need to be thrashed out. If they’re not, there is a greater risk of a disorderly outcome.”
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His comments came after the John Lewis Partnership blamed falling consumer demand and cost increases linked to the Brexit-hit pound for profits more than halving.
The group, which is behind the eponymous department store chain and upmarket grocer Waitrose, saw pre-tax profits for the six months to the end of July plummet 53.3 per cent to £26.6 million.
The figure includes exceptional items linked to restructuring, property and redundancy costs.
Mayfield said the group suffered in categories linked to the housing market, which has exhibited a marked slowdown since the EU referendum.
“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. The exchange rate-driven increase in cost prices has also put pressure on margin.”
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Hide AdRetailers have been among the hardest hit by the decline of the UK currency, which has resulted in costs and shop prices soaring, denting consumer demand.
However, Mayfield added that the group has held back on increasing prices across “many areas”.
Waitrose saw its operating profit fall more than 17.4 per cent to £100.8m as the supermarket decided to take the hit and absorb rising costs, rather than passing them on to shoppers.
Operating profit at John Lewis grew 38.7 per cent to £50.2m.
Gross sales across the partnership rose 2.3 per cent to £5.4 billion, but like-for-like sales showed only muted growth. Like-for-like sales at Waitrose rose 0.7 per cent while at John Lewis comparable sales nudged up just 0.1 per cent.
Stripping out exceptional items, profit before tax was down 4.6 per cent to £83m, while operating profit sank 39 per cent to £69m.
Looking ahead, Mayfield struck a sombre tone, warning of more pain: “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.”