John Lewis Partnership has revealed its HY results to 28th July 2018, citing a YoY decrease in profits before tax and exceptional items of -98.8% despite moderate growth in gross sales and revenue.
“These are challenging times in retail," says chairman Charlie Mayfield. "Our profits before exceptionals are in line with what we said they would be at our strategy update in June. We’re continuing to improve our offer for customers while ensuring we have the financial strength to continue developing our business going forward. This is reflected in both brands [John Lewis and Waitrose] continuing to grow sales and customer numbers, and our total net debts reducing.
"Profits before exceptionals are always lower and more volatile in the first half than the second half. It is especially so this half year, driven mainly by John Lewis & Partners where gross margin has been squeezed in what has been the most promotional market we’ve seen in almost a decade.
"The pressure on gross margin has predominantly been from our commitment to maintain price competitiveness. This reflects our decision not to pass on to our customers all cost price inflation from a weaker exchange rate and from our Never Knowingly Undersold promise, where we have seen an unprecedented level of price matching as other retailers have discounted heavily.
"Gross margin was also affected by a sales mix shift towards electronics rather than big-ticket items in Home. In addition, John Lewis & Partners profits were impacted by the costs of new shops and higher IT costs as we continued to invest for future growth, and from lower property profits compared to last year."
According to the report, the company's financial priority remains to reduce its debt ratio to around three times cash flow within some five years.
"Despite the reduction in profits, our total net debts have reduced," continues Charlie. "Our accounting pension deficit has more than halved since January 2018 to £171.3m (net of deferred tax) and our estimated actuarial pension deficit of £89m represented a funding level of over 98%. Total net debts are £700m less than last year and we continue to maintain a strong liquidity position. This is all consistent with our plans to ensure a strong financial position in order to invest in our strategy of differentiation at a rate of £400-£500m per year."