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John Lewis half-year profits slump by 99%

Sky News logo Sky News 13/09/2018
The rebranding was first announced in June © Reuters The rebranding was first announced in June

The John Lewis Partnership has announced a 99% slump in half-year profits, saying its department stores are being squeezed by the "most promotional market we have seen for almost a decade."

The company, which also has Waitrose supermarkets in its stable, had previously warned that it expected to make no profits over the first six months of its financial year to 28 July.

It reported that profit before tax and exceptional items came in at £1.2m, down £95m on the same period last year.

That was despite gross sales rising 1.6% higher to almost £5.5bn.

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John Lewis and Waitrose stores have been rebranded to reflect the Partnership's business model © Reuters John Lewis and Waitrose stores have been rebranded to reflect the Partnership's business model

The partnership, which recently completed a rebranding exercise to include '& Partners' at its department stores and supermarkets to reflect its employee-owned business model, said discounting, cost-cutting and investment had taken its toll on profitability.

It also cited a shift towards sales of lower-margin electronics from big-ticket home items.

The partnership gave its trading update as department store rivals suffer the effects of the tougher economy in the run-up to Brexit - with House of Fraser recently being bought out of administration by Mike Ashley's Sports Direct.

Fenwick and Debenhams are among others facing fierce headwinds.

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Chairman, Sir Charlie Mayfield, said: "We're continuing to improve our offer for customers while ensuring we have the financial strength to continue developing our business going forward.

"This is reflected in both brands continuing to grow sales and customer numbers, and our total net debts reducing."

He said John Lewis & Partners had been particularly affected by discounting and that full-year profit would be "substantially lower" than last year for the group as a whole.

"The pressure on gross margin has predominantly been from our commitment to maintain price competitiveness.

"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, where we have seen an unprecedented level of price matching as other retailers have discounted heavily," he added.

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