John Lewis blames higher taxes as it swings into the red
A rise in national insurance contributions and a packaging levy has ‘significantly’ impacted John Lewis, with the retailer reporting a half-year loss despite an increase in revenue.
The company, which also owns Waitrose, reported a loss before tax and exceptional items of £33m for the 26 weeks ended 26 July.
It has been “significantly impacted by costs not present in the equivalent prior period”, it said, including £29m of costs for the new Extended Producer Responsibility (EPR) packaging levy and higher National Insurance Contributions (NICs).
Retailers across the country have been vocal about the damage caused by the higher taxes announced in the last autumn Budget, which have led to a downturn in hiring in the sector.
Chair Jason Tarry said that subdued consumer confidence was another roadblock, but the company can “continue to progress momentum through into the second half, and particularly going into Christmas”.
“We will focus on what we can control and what we can what we can do. We’ll do the right things now, but also for the long term,” he said in an investor call.
John Lewis said it was “well-positioned” to deliver full-year profit growth in the second half of the year, where it usually provides the majority of its sales and profit.
Chief financial officer Andy Mounsey added that the company remains focused on “driving continued customer service”, with plans to recruit up to 13,000 roles to support Christmas trading.
Robyn Duffy, Consumer Markets Senior Analyst at RSM UK, said that “the picture is more stable than the headline suggests”.
“On a like-for-like basis, profitability was broadly flat year-on-year – underlining that the core business remains resilient,” Duffy added.
M&S cyber attack ‘unexpected windfall’ for John Lewis
Group sales during the six months grew to £6.2bn, an increase of four per cent year-on-year, driven by six per cent growth at Waitrose and two per cent growth at John Lewis.
Duffy said the “recent M&S cyber-attack likely resulted in an unexpected windfall for John Lewis”.
“With M&S’s online functions temporarily unavailable from April to June and stock on shelves significantly impacted, many consumers, particularly those in the overlapping target demographic, would have naturally turned to John Lewis as an alternative,” Duffy added.
Waitrose managing director James Bailey, however, said that reports the M&S attacks had helped John Lewis were overblown.
“It wasn’t much of an impact for us… we’re just carrying on a normal and attracting new customers from wherever they come,” he said.