Business

John Lewis unveils first-ever half-year loss

John Lewis has warned a no-deal Brexit would have a significant impact on its business as it slumped to its first-ever half-year loss.

The group, which owns Waitrose and the John Lewis department stores, dived £25.9m into the red in the six months to 27 July after making an underlying pretax profit of £800,000 in the same period a year before.

Sir Charlie Mayfield, the chair of the staff-owned retailer, said the loss reflected lower sales in some categories, including homewares and electrical goods, as well as cost inflation and IT investment.

He said he expected retail conditions to remain challenging and warned: “Should the UK leave the EU without a deal, we expect the effect to be significant and it will not be possible to mitigate that impact.”

The group has tried to bolster its financial resilience by reducing debt, hoarding cash and increasing foreign currency hedging, as well as stockpiling some products, including wine, olive oil and canned goods.

Mayfield said no deal was likely to mean disruption to the import of fresh food across the Channel and might put people off buying non-essential items in the run-up to Christmas. “Brexit continues to weigh on consumer sentiment at a crucial time for the sector as we enter the peak trading period,” he said.

Profit at Waitrose rose by £14.1m to £110.1m, partly buoyed by one-off profits from the sale of properties, but the John Lewis department stores slid to an underlying loss of £61.8m, more than triple the £19.3m loss made in the same period a year before. Both chains recorded a fall in sales, with Waitrose down 0.8% and John Lewis down 1.8%.

Waitrose said online sales rose by nearly 11%, but it also revealed it had decided to end a tie-up with Today Development Partners, the technology company it signed up in May to help it expand when a long-term partnership with the grocery delivery company Ocado ends next year.

Rob Collins, the managing director of Waitrose, would not comment on the split with TDP, which is headed by Jonathan Faiman, a former Goldman Sachs banker who left Ocado in 2009, and Mo Gawdat, the former chief business officer of Google X, the search engine’s innovation lab.

He said it might take Waitrose slightly longer to introduce the kind of hi-tech automation it had been discussing with TDP, but it still expected to treble the size of its online business to £1bn annually in three years. The company will now be using in-house expertise and working with other partners to do so.

The half-year difficulties come after John Lewis slashed its annual staff bonus to the lowest level in 66 years after a severe slump in profits at its department store chain.

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The company’s 83,900 workers, known as partners because they jointly own the business, received a payout of 3% of their annual salary, down from 18% in 2011.

The workers’ gold-standard pension scheme has also been cut. The accounts show the group gained a £249m one-off benefit from the closure of the defined benefit scheme.

As a result, total pretax profit rose to £191.5m from £6m a year before after other one-off costs including £37.5m on restructuring and a £10m benefit from a legal case, which the company refused to comment on. Restructuring costs covered redundancies at Waitrose and the department stores.

Troubles in the department store operation reflect upheaval in the sector due to changing shopping habits and the rising cost of running large stores.

Debenhams and House of Fraser have entered administration in the past 18 months. Both continue to trade after rescue deals, but Debenhams is to close more than 20 stores after Christmas, with House of Fraser also shutting outlets. Sports Direct, which owns House of Fraser, said its problems could be “terminal”.

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