John Lewis fears tough times ahead

John Lewis has admitted it is bracing itself for difficult trading conditions during the rest of the year.

In a statement accompanying the publication of its financial results for the year ending 29th January, the retailer cited a number of reasons for its fears.

“We expect trading conditions to be more difficult in 2011, as the VAT increase, rising unemployment, and public sector spending cuts begin to have an impact on consumer spending,” it said.

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John Lewis also warned that input cost price inflation was a continuing threat, but said it was not yet seeing the level of inflation in its prices that have been reported.

“There are two principal reasons for this: firstly, some of the inflationary pressures are being absorbed by us and offset by increased efficiency and secondly, customers are becoming increasingly sophisticated in their ability to shop through our expanding ranges from premium to value and manage their own expenditure carefully,” stated the company.

Despitethe challenging retail climate, the company claims to be “encouraged” that some parts of the British economy are improving slightly. It also said there were some early signs that property developers were willing to invest in new projects and developments.

The company plans to invest around £600m developing its business this year, creating 4,300 new jobs in the process.

It also revealed that gross sales increased 2% year-on-year (0.5% like-for-like) during the first five weeks of its new fiscal year, while gross sales from The John Lewis Partnership rose 6.5% on the same basis.

The company’s annual numbers, meanwhile, appear to show a business in rude health. Revenues increased 12% to £3.23bn last year, while operating profits climbed 22% to £36.5m, marking a return to pre-recession levels.

Sales of home products increased 12% year-on-year, while more than £538m of its overall turnover came from its website.

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