The John Lewis Partnership has reported profits for the first half of this year down by 98.8 per cent as compared with the same period in 2017.
Despite its gross sales rising during the first half, the retailer, which operates John Lewis department stores and Waitrose supermarkets across the country, was only able to generate profits worth £1.2 million in the first six months of the year.
Statements given by the partnership’s chairman Sir Charlie Mayfield refer specifically to promotional activities among competitors as a key part of the reason why John Lewis has found it so difficult to generate profits in recent months.
“These are challenging times in retail,” he said, describing retail environments presently as being “the most promotional market we’ve seen in almost a decade”.
“The pressure on gross margin has predominantly been from our commitment to maintain price competitiveness,” Sir Charlie went on to say.
“This reflects our decision not to pass on to our customers all cost price inflation from a weaker exchange rate and from our ‘Never Knowingly Undersold’ promise.”
John Lewis’ policy of price matching offers available from rival retailers contributed to its department store business recording losses worth just over £19 million in the first half of 2018.
By comparison, the same business delivered profits worth £54.4 million in the first six months of last year.
John Lewis is far from being the only retailer facing financial difficulties at present, with its rival department store operator Debenhams in the process of closing stores to cut losses and House of Fraser having recently collapsed into administration.
Statements given on behalf of the John Lewis Partnership suggest that its bosses consider uncertainty surrounding the issue of Brexit to be a major contributing factor when it comes to the challenges being faced by its businesses but also by the wider retail sector.
“With the level of uncertainty facing consumers and the economy, in part due to ongoing Brexit negotiations, forecasting is particularly difficult but we continue to expect full year profits to be substantially lower than last year for the partnership as a whole,” the retailer said.
Julie Palmer, regional managing partner at Begbies Traynor, says:
This has been coming, but no one expected profits to fall this much.
The high street has been in decline as our own Red Flag Alert Report indicates with more businesses than ever in distress. But this particular outcome is a significant indicator of the state of play we are now in. This brand was hailed as the model to which all should follow, and as a commercial and customer success – make no mistake, for the high street this is as significant as the fall of the Roman Empire.
And much like the fall of Rome, it’s not just the empire that suffers, the infrastructure that supplies it will too. The UK retail industry must steel itself for dark times to rise again.
Julie is a law graduate who qualified with Price Waterhouse in 1994. Julie joined Smith & Williamson in 1997 and became a partner in 2001. With Mike Stevenson, Julie set up Middleton Partners offices in Salisbury and Southampton, both of which are now part of Begbies Traynor.
Julie is a member of the Insolvency Practitioners Association and is a Fellow of The Association of Business Recovery Professionals. Julie deals with all aspects of Corporate Recovery and turnaround work and takes all form of personal insolvency appointments.