John Lewis's profits dented by High Street discounting extravaganza

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John Lewis’s efforts to match rivals’ discounting saw it nursing heavy losses on Thursday as the bloodbath on the High Street claimed its highest-profile victim. 

Chairman Sir Charlie Mayfield said there were “twice as many discounting extravaganza days” from rivals including Debenhams and House of Fraser compared with the same period last year. 

“When the sales aren’t there they [Debenhams and House of Fraser] have to take extreme steps to shift stock,” he added. 

The department store chain made a £33 million loss for the first half to June 28, going into the red for the first time in at least a decade. The fall in sterling as well as fewer people buying big-ticket items also hurt its margins. 

Same-store sales were down by 1.2% despite more shoppers snapping up its womenswear. However, Mayfield vowed not to ditch the department store chain’s Never Knowingly Undersold promise: “You can’t be [NKU] in the good times, you have to be in tougher times too.”

The partnership’s profits plunged 99% to £1.2 million. Waitrose’s profits were also off, 12.2% to £96.4 million, despite a 2.1% rise in sales to £3.4 billion. The grocer’s same-store sales were up 2.6% though, and it expects it to return to profit growth in the second half. 

“A decade or so ago, John Lewis was the envy of the retail world with tens of thousands of staff picking up generous bonuses on the back of rising profits. Fast forward and the business is clearly struggling to stay relevant,” said AJ Bell’s Russ Mould.

The partnership plans to plough £400-£500 million a year into refurbishing its stores and website, and offer new products and services. Mayfield fell short of saying whether he might cut staff bonuses again after they came down from 6% last year to 5%. 

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September 13, 2018 |
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