Published: Fri, March 09, 2018
Medicine | By Earnest Bishop

John Lewis Profit Warning Deepens UK Retail Crisis

John Lewis Profit Warning Deepens UK Retail Crisis

John Lewis Partnership PLC, the owner of John Lewis departmental store chain and Waitrose supermarkets, on Thursday reported a sharp drop in annual profits and warned on further earnings pressure from United Kingdom retail market volatility.

In the year to January 27, gross sales across the partnership rose two per cent, with like-for-likes growing at 0.4 per cent and 0.9 per cent at Waitrose and John Lewis respectively.

In the first five weeks of the company's 2018 financial year, Waitrose sales were up by 2.7% and John Lewis sales were down 2.8%.

It comes as the partnership - which owns the eponymous department store and upmarket supermarket Waitrose - posted a 77% plunge in bottom line pre-tax annual profits to £103.9m after one-off charges.

He admitted that changes made across the group had affected "many" of its employees, with 1,400 redundancies in the past year.

Despite the bonus cut, Mayfield said John Lewis was committed to increasing pay for its ordinary workers who earn an average £8.91 an hour, well above the legal minimum of £7.50 an hour for over-25s.

He added: "We said in January 2017 that we were preparing for tougher trading conditions with weakness in Sterling feeding through into cost prices, putting pressure on margin, and much higher exceptional costs as a result of an acceleration of planned changes".

"We expect trading to be volatile in 2018/19, with continuing economic uncertainty and no let up in competitive intensity".

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Sir Charlie Mayfield, chairman of John Lewis Partnership said: 'As we anticipated, 2017 was a challenging year.

Waitrose gross sales were up 2.7% (up 2.4% like-for-like, excluding fuel) and John Lewis gross sales were down 2.8% (down 3.4% like-for-like).

Across the partnership gross sales rose 2% to £11.59 billion.

The department-store chain warned of further pressure on profits after earnings before exceptional items fell 22 percent in the latest fiscal year.

John Lewis's poor end of year results reflect the hard times afflicting the United Kingdom retail sector, which is having to cope with weak consumer sentiment as well as currency swings following the UK's vote to leave the European Union.

Waitrose has seen like-for-like sales rise 2.4% since the year-end.

"We did both and I am pleased to say that despite lower profits, strong cash flow has enabled us to reduce our total net debts".

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