John Lewis profits fall amid '˜deep changes' for retail

Waitrose-owner John Lewis Partnership has taken a £25 million hit as it scraps plans to open seven new supermarkets over the next two years amid an ongoing grocery price war.

John Lewis Partnership saw half-year profits drop 14.7%. Picture: Julie Bull
John Lewis Partnership saw half-year profits drop 14.7%. Picture: Julie Bull

Following a strategic review, bosses will instead be “re-prioritising future investment spend towards existing stores”.

Aldi has overtaken Waitrose as Britain’s sixth-biggest supermarket chain and its market share has dipped in recent months to 5.1 per cent. The market remains dominated by the “big four” of Tesco, Asda, Sainsbury’s and Morrisons who remain locked in a battle for custom as food deflation eats away at margins.

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Sales at Waitrose increased by 2.2 per cent to almost £3.3 billion in the first half, but like-for-like takings slipped 1 per cent with the firm flagging a “challenging” market. Waitrose has seven branches across Scotland – two in Edinburgh and one each in Helensburgh, Glasgow, Milngavie, Newton Mearns and Stirling – employing some 1,200 people.

Waitrose managing director Rob Collins said: “We are aiming to turbo charge out investment in our existing estate and an important part of that is hospitality.”

The news came as the wider John Lewis Partnership posted a 14.7 per cent slide in half-year, pre-tax profits to £81.9m, citing “deep structural changes in the retail market”.

It said its commitment to competitive pricing, increasing pay and investment held back profits in the six months to 30 July.

Chairman Sir Charlie Mayfield said the results from the employee-owned group, which has three Scottish department stores at Aberdeen, Edinburgh and Glasgow, were not linked to the EU referendum result.

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He said: “We have grown gross sales and market share across both Waitrose and John Lewis, but our profits are down.

“This reflects market conditions and, in particular, steps we are taking to adapt the partnership for the future. These are not as a consequence of the EU referendum result, which 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.”

Sales across the group were up 3.1 per cent to £5.3bn. After exceptionals, including the £25m writedown on property assets, pre-tax profits tumbled 75 per cent to £56.9m.

Independent retail analyst Nick Bubb described the half-year profits as “disappointing”.