John Lewis posts £120m loss as Labour tax raid pushes up costs
The owner of John Lewis fell to a loss of more than £120m in the first half of its trading year as the retail giant hit out at Labour tax raids for “the increased costs of doing business”.
The John Lewis Partnership, which also owns Waitrose, posted a pre-tax loss of £124m, 41 per cent larger than last year, as sales grew by just two per cent to £6.3bn.
Jason Tarry, chairman of the employee-owned group, said: “Our first-half results reflect our continued investment in our transformation, a more challenging trading environment and the increased costs of doing business.”
The company said its operating costs in the period were pushed up by the rising cost of employment, including Labour’s hike to employer national insurance contributions (NICs), which retailers have warned is preventing them from hiring.
Sales at John Lewis fell by two per cent to £2bn in the six months to August, as the department store battled with a “more challenging” discretionary market, as cash-strapped shoppers cut back on spending on big-ticket items.
The retailer said it has been more sparing in its discount offers in a bid to boost sales of full-price items, though it did invest in promotions “in response to the subdued market”.
The department store chain posted an adjusted operating loss of £83m, up from £53m last year, which it said reflected “softer trading, cost growth” and higher investment.
Earlier this month, Peter Ruis stepped down as managing director of John Lewis, just three years into his bid to revamp the “stuffy” department store chain. He has been replaced by former New Look boss Will Kernan.
In his last act as managing director, Ruis said the UK economy is facing a “permacrisis” and warned the government against a “terrible” business rates raid on large retailers.
Iran war ‘weighs on John Lewis customers’
Up-market grocer Waitrose was a bright spot for the Partnership in its trading update on Thursday, taking a four per cent sales uplift to £4.3bn.
But the group said that higher costs caused by the summer heatwaves weighed on the supermarket’s margins and pushed its adjusted operating profit down by six per cent to £103m.
Waitrose said it invested £20m in pushing down prices, as grocers compete to attract shoppers minding their budgets amid fears that the Iran war is pushing up inflation.
“There is no doubt the wider economic and geopolitical landscape has weighed on our customers during the first half and we remain cautious in our outlook for the second half,” the group said.
The Partnership said it expects to make most of its annual profit in the second half of the year, adding that it is confident it is “doing the right things for our customers”.
John Lewis said it will soon see the benefits of its investment in its infrastructure, including shop-floor refurbishments, electronic shelf labels and warehouse automation.
Tarry said: “We are managing the business with discipline and have chosen to keep investing in our customers, Partners and the long-term strength of our brands.
“While losses grew in the half, our employee-owned model allows us to take that longer-term view, supported by our financial strength.”