Economy

John Lewis profit slumps as inflation weighs on consumer demand

John Lewis profit slumps as inflation weighs on consumer demand”

John Lewis on Thursday reported a fall in first half profit and warned that its performance during the rest of this year and into next would be marred by softening consumer demand.

The group, which owns Waitrose supermarkets as well as the John Lewis department store chain, said it was operating in a tough retail market as United Kingdom consumers were less willing to spend money against a backdrop of higher inflation and political uncertainty. "These have dampened customer demand, especially in categories connected to the housing market", said Charlie Mayfield, chairman of the John Lewis Partnership. "There's any number of reasons for that", he told BBC Radio 4's Today programme.

Gross sales were up 2.3% for both brands with revenue hitting nearly £4.8bn - up 2.2% on the same period previous year. "The exchange rate-driven increase in cost prices has also put pressure on margin".

Operating profit before exceptional items fell 12.8 percent to 125.4 million pounds. When redundancy and restructuring costs were stripped out, pre-tax profit was down nearly 5% at £83m as higher costs ate into margins. Brexit is having an effect on the economy, no question. "Instead what we've done is we've pressed on with some really important changes that are going to make the business fit for the future", he said. Like-for-like sales at Waitrose rose 0.7 per cent while at John Lewis comparable sales nudged up just 0.1 per cent.

"We expect margin pressure to continue into the second half year and we will incur higher pension accounting charges, as a result of low market interest rates at the start of the year".

Morrisons - one of the so-called big four supermarket chains - said it had achieved seven consecutive quarters of sales growth as its turnaround plan continued to deliver improvements to shoppers.



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