Published: Fri, March 09, 2018
Health | By Jay Jacobs

John Lewis and Waitrose owner reports 77% profit plunge

John Lewis and Waitrose owner reports 77% profit plunge

A "particularly strong" performance in womenswear was not enough to offset a 77% drop in profit at the John Lewis Partnership for the full-year.

John Lewis Partnership chairman Charlie Mayfield on Thursday blamed falling disposable income, a lack of activity in the housing market and the negative impact of Brexit on consumer sentiment for Britons reining in their spending.

'The number of partners will come down as a effect of that'.

John Lewis Partnership, the owner of John Lewis department stores and the Waitrose supermarket chain, has reported a 77% fall in pre-tax profits to £104m after taking into account staff bonuses.

The payouts are still generous compared to other firms as the John Lewis group sees its staff as partners, rather than workers.

"We said in January 2017 that we were preparing for tougher trading conditions with weakness in sterling feeding through into cost prices, putting pressure on margin, and much higher exceptional costs as a result of an acceleration of planned changes".

Following a profit warning in January, Sir Mayfield said the business chose to reduce the proportion of profits paid as Partnership Bonus previous year in a bid to absorb the impact of tougher trading conditions.

He added: 'We therefore anticipate further pressure on profits'.

Lower profit margins at the Waitrose driven by the fall in the value of the pound cut pretax profits by almost 22%.

It added that the new financial year had got off to a disappointing start for its John Lewis chain, with like-for-like sales for the first five weeks down 3.4% after disruption from last week's heavy snow. Gross sales were up 2.2% to £4.84bn, with like-for-like sales growth of 0.4%.

Redundancy and restructuring costs were part of the £111.3m hit that contributed to the hefty fall in bottom-line profits.

Investments during the year included in-store improvements at 127 branches, as well as investment in the website to improve the online grocery operation, which saw sales growth of 10.9 per cent.

The supermarket posted a 32.1% decline in operating profit to £172m.

In a statement issued today (8 March), Sir Charlie Mayfield, Chairman of John Lewis Partnership, said that 2017 had been a "challenging year" with subdued consumer demand and profits were down "mainly as a result of intensifying margin pressure in Waitrose".

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