John Lewis Partnership profits have fallen by more than 50% in the first half of the year.
The company’s interim results show pre-tax profit fell 53% to £26.6m in the six months to July 29.
When £56.4m of redundancy and restructuring costs were stripped out, pre-tax profit was down almost 5% at £83m, as higher costs ate into margins.
However, group sales rose by 2.3% over the period, to £5.4bn.
Sales during the clearance period were particularly strong, with a compelling customer offer, up 4.5% compared to last year. Elsewhere, fashion sales were up 3.5%, with standout performances in womenswear.
Online sales represented 37.3% of total merchandise sales, up from 34.5% last year.
Talking to the BBC, John Lewis Partnership chairman Sir Charlie Mayfield said: “Look, nobody should be surprised that this is a tough market for retailers. There’s any number of reasons for that.”
He continued: “The reason our profits are down is predominantly because of margin, and cost prices are rising. It’s a very competitive market, retail prices are not rising as fast.”
The company has been hit by costs associated with overhauling the business and weakened customer demand from inflationary pressures and political uncertainty following Brexit.
In a statement, the chairman shared: “Gross sales were up 2.3% in both Waitrose and John Lewis; a solid performance in a difficult market. Our Partnership profit before tax and exceptional items was down 4.6%, but this was flattered by property profits and after excluding these it was down 17.2%.
“As we anticipated in our full-year results statement in March, the first half of this year has seen inflationary pressures driven by exchange rates and political uncertainty. These have dampened customer demand, especially in categories connected to the housing market. Against that backdrop, our market share gains in fashion stood out. The exchange rate driven increase in cost prices has also put pressure on margin. We have chosen to hold back on increasing prices across many areas.”
The chairman concluded that the John Lewis Partnership is “confident” that its “relentless focus” on the customer and differentiating the brand from its competitors will set the business up for success in the second half, where the majority of its sales and profit are delivered.