John Lewis blames weak pound for profit slump, sparking row with Raab
High street bellwether the John Lewis Partnership has warned of a “challenging time” in the retail sector as profits plummeted by 99 per cent.
Half year profits for the six month period to the end of July fell to £1.2m at the chain, which also includes the Waitrose and Partners supermarket, sparking a political row after its chairman said it had been affected by the weak pound.
The company, which warned that full-year earnings would be “substantially lower”, said that the falling pound had squeezed profit margins at its department store arm. But Brexit Secretary Dominic Raab hit back, claiming that poorly performing business found it “easy” to blame Brexit.
“It’s probably rather easy at this moment in time for any business which isn’t doing rather well to point to Brexit,” he said. “I don’t doubt that uncertainty around these negotiations will have an impact on business. All I’m gently saying it’s rather easy for a business to blame Brexit and the politicians rather than taking responsibility for their own situation.”
John Lewis chairman Sir Charlie Mayfield said the firm had faced the “the most promotional market we’ve seen in almost a decade”, adding that the weak pound had hit margins amid a decision not to pass on price increases to customers.
But he later spoke out against Raab’s comments. “I didn’t actually say that Brexit is to blame for our results. But the fact is that sterling is weaker and one of the factors in that is uncertainty,” he said.
The news is another blow for the department store sector, which also saw the idea mooted of a possible merger between struggling brands House of Fraser and Debenhams. Sports Direct bought troubled House of Fraser last month and owns 29.7 per cent of Debenhams.
Sir Charlie also said the department store chain had been hit by its own “Never Knowingly Undersold” promise, where there had been an “unprecedented level” of price matching against other retailers who had heavily discounted goods.
At Waitrose, profits were down on last year, but he said that like-for-like sales – in shops that have been open for more than one year–showi ed improvement in the second three months of the quarter.
John lewis recently re branded its stores to“John Lewis and Partners” and “Waitrose and Partners” to reflect the 85,000 staff members, who receive an annual bonus relating to profits at the chain.