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John Lewis warns of no-deal Brexit impact John Lewis warns of no-deal Brexit impact
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John Lewis has warned that a no-deal Brexit would have a significant impact on its business as it slumped to its first-ever half-year loss.John Lewis has 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 owns Waitrose as 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 the same period a year before. The group, which owns Waitrose and 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 the same 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. Sir Charlie Mayfield, the chair 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 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. The group has tried to bolster its financial resilience by reducing debt, hoarding cash and increasing foreign currency hedging as well as stockpiling some goods, including wine, olive oil and canned 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.” Mayfield said no deal was likely to mean disruption to the import of fresh food across the channel and might put people off buying non-essential items in the run up to Christmas. He 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%. Profits at Waitrose rose by £14.1m to £110.1m, partly buoyed 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%.
Waitrose said online sales rose by nearly 11%, but it also revealed that it had decided to end a partnership with Today Development Partners (TDP), the technology company it signed up in May to help it expand when a long-term partnership with grocery delivery specialist Ocado ends next year.
Rob Collins, the managing director of Waitrose, would not comment on the split with TDP, which is headed by Jonathan Faiman, a former Goldman Sachs banker who left Ocado in 2009, and Mo Gawdat, the former chief business officer of Google X, the search engine’s innovation lab.
He said it might take Waitrose slightly longer to introduce the kind of hi-tech automation it had been discussing with TDP, but it still expected to treble the size of its online business to £1bn annually in three years. It will now be using in-house expertise and working with other partners to do so.
The half-year difficulties come after John Lewis in March slashed its annual staff bonus to the lowest level in 66 years after a severe slump in profits at its department store chain.The half-year difficulties come after John Lewis in March slashed its annual staff bonus to 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 company’s 83,900 workers, known as partners because they jointly own the business, received 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 also been cut. The accounts show that the group gained a £249m 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. The workers’ gold-standard pension scheme has also been cut. The accounts show the group gained a £249m one-off benefit from the closure of the defined benefit scheme. As a result, total pretax profit jumped to £191.5m from £6m a year before after other one-off costs including £37.5m on restructuring and a £10m benefit from a legal case which the company refused to comment on. Restructuring costs covered redundancies at 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. Troubles in the department store operation reflect upheaval in the sector due to 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 to close more than 20 stores after Christmas with House of Fraser also closing outlets. Sports Direct, which owns House of Fraser, has said its problems could be “terminal”. Debenhams and House of Fraser have fallen into administration in the past 18 months. Both continue to trade after rescue deals, but Debenhams is to close more than 20 stores after Christmas, with House of Fraser also closing outlets. Sports Direct, which owns House of Fraser, said its problems could be “terminal”.
John LewisJohn Lewis
BrexitBrexit
Retail industryRetail industry
WaitroseWaitrose
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