Will ailing John Lewis axe its price pledge?

JOHN Lewis could be forced to ditch its Never Knowingly Undersold pledge after plunging to the first halfyear loss in its 155-year history.

The John Lewis Partnership, which also owns Waitrose, slid £25.9million into the red in the year to July 17, down from a profit of £1million in the same period last year.

The group blamed wider troubles on the high street for a 1.2 per cent fall in sales to £5.4billion. Its Never Knowingly Undersold pledge forces it to match prices offered by competitors such as House of Fraser and Debenhams.

The policy has driven down profits by forcing John Lewis to cut costs when other firms have sales – and analysts now fear the policy is driving the company to the brink.

Paula Nickolds, managing director of the store chain, said the number of times it was forced to change prices during the six months was up by almost three- quarters on 2018. She added: ‘This dropped straight to the bottom line. It’s a direct consequence of lower consumer confidence which I sadly expect to continue.’

Experts warned the retailer should consider axing the price promise if it wants to get the business back on track.

Chris Daly, of the Chartered Institute of Marketing, said: ‘Despite its relative strength, John Lewis is not immune to tough retail conditions. It risks heading towards a price cut trap, partly because its “Never Knowingly Undersold” brand positioning forces it to pursue rivals’ discounts.

‘Add to this customers who are tougher than ever to lure into stores, and today’s results present a stark warning.’

Russ Mould, of trading firm AJ Bell, added: ‘It’s making life very hard for them. They clearly see it as a key differentiator but John Lewis doesn’t just sell on price, it sells on its service.’

Miss Nickolds said the company had no plans to scrap the policy despite mounting pressure. She said: ‘We remain committed to our principles and the long-term commitment we’ve made to Never Knowingly Undersold.

‘We’ve outperformed the market and that’s about the continued investment in doing things differently and we continue to press forward. That will stand us in good stead against the distress.’

John Lewis’s results will put incoming chairman Sharon White under intense pressure to revive its fortunes. The head of media watchdog Ofcom will take over from current chairman Sir Charlie Mayfield early next year.

Waitrose fared better in the period, but sales still fell by 0.4 per cent. The supermarket is losing a delivery contract with Ocado, which has struck a deal with rival Marks & Spencer.