Fears of losses at John Lewis as its rivals slash prices

THE John Lewis Partnership is poised to deliver more bad news this week after mass discounting by its two main competitors forced it to cut prices.

Analysts warned it has struggled to make a profit in the first half after sales declined at the group, which owns John Lewis department stores and Waitrose supermarkets.

A year ago the Partnership sent shock waves through the retail market after it complained that the most challenging trading climate f or a decade had diminished profits in the first six months of its financial year. That left it nursing profit of just £1 million.

Retail analyst Nick Bubb said the group would struggle to improve on that this Thursday when it reveals its performance for the six months to the end of July, despite resilience at Waitrose.

He said the torrid conditions had battered the department store chain and forecast the group could slide to a first-half loss of £15 million.

High street rival House of Fraser collapsed last summer and in April competitor Debenhams was forced to trigger a painful restructuring that wiped out its shareholders and prompted the drawing up of a 50-store closure programme.

Debenhams’ problems have led to court action by landlords complaining they have lost out in the reorganisation. The action has been funded by disgruntled ex-shareholder Mike Ashley, who had tried to wrestle control of Debenhams before it was seized by lenders.

According to evidence presented in court last week, Ashley has offered landlords who stand to lose out from the reorganisation better rent deals as part of a strategy that would undermine the financial restructure plan. However, the judge at the hearing dismissed a dossier of evidence presented by Justin Barnes – a consultant who helps Ashley take over other businesses – as inadmissible.

Ashley bought House of Fraser for £ 90 million and promised to ‘save’ the high street. But the company has been heavily discounting stock which has forced rivals such as John Lewis to follow suit.

Bubb said he expected a ‘cautious’ outlook from John Lewis Partnership chairman Sir Charlie Mayfield, who exits the business next year. Bubb said he expected the numbers to be ‘weak but not disastrous’ adding that profits at the Waitrose supermarket may have ‘held up quite well’.

He said the Partnership is also likely to discuss plans for Waitrose. com after its delivery partner Ocado signed a deal with Marks & Spencer.