Retail chain says it would be unable to offset effects of no deal as it posts first-ever half-year loss
John Lewishas warned that a no- deal Brexit would have a significant impact on its business as it slumped to its first-ever half-year loss.
The group, which ownsWaitroseas well as the John Lewis department stores, dived £ 25. 9m into the red in the six months to 27 July after making an underlying pretax profit of £ 0.8m in thesame period a year before.
Sir Charlie Mayfield, chairman of the staff-owned retailer, said the loss reflected lower sales in some categories, including homewares and electrical goods, as well as cost inflation and IT investment.
He said he expected retail conditions to “remain challenging” and warned: “Should the UK leave the EU without a deal, we expect the effect to be significant and it will not be possible to mitigate that impact. ”
He said the group had tried to bolster its financial resilience by reducing debt, hoarding cash and increasing foreign currency hedging as well as stockpiling some goods.
But Mayfield said: “Brexit continues to weigh on consumer sentiment at a crucial time for the sector as we enter the peak trading period.”
Profits at Waitrose rose by £ 14 1m to £ 110. 1m, partly boosted by one-off profits from the sale of properties, but the John Lewis department stores slid to an underlying loss of £ 61 .8m, more than triple the £ 19 .3m loss made in the same period a year before. Both chains recorded a fall in sales, with Waitrose down 0.8% and (John Lewis) down 1.8%.
The half-year difficulties come after John Lewis in Marchslashed its annual staff bonusto the lowest level in 66 years after a severe slump in profits at its department store chain.
The company’s 83, 900 workers, known as partners because they jointly own the business, got a payout of just 3% of their annual salary, down from 18% in 2011 and the lowest level since 1953.
The workers’ gold-standard pension scheme has alsobeen cut. The accounts show that the group gained a £ 249 m one -off benefit from the closure of the defined benefit scheme. As a result, total pretax profits jumped to £ 191 .5m from £ 6m a year before despite other one-off costs including £ 37 .5m on restructuring. This covered redundancies at both Waitrose and the department stores.
Troubles in the department store operation reflect a shake out in the sector because of changing shopping habits and the rising cost of running large stores.
Debenhams and House of Fraser have both fallen into administration in the last 18 months. Both continue to trade after rescue deals, but Debenhams is toclose more than 20 storesafter Christmas with House of Fraser also closing outlets. Sports Direct, which owns House of Fraser, has said itsproblems could be “terminal”.
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