John Lewis has posted a sharp drop in operating profit in its first half as it matched the scale of discounting on the high street with its ‘Never Knowingly Undersold’ commitment and invested in the business.
For the half year to July 30, operating profit was down 54.5% to £15.8m. Gross sales were up 2.5% to £1.42bn, and like-for-like sales were up 1%.
John Lewis said profits were impacted by its ‘Never Knowingly Undersold’ commitment and the highly competitive trading environment. However, it also said it continues with its strategy to grow the business and invest for the long term.
John Lewis fashion sales were up 4.2%.
The retailer added that its private label collections such as the ‘John Lewis & Co’ classic menswear range are adding an extra dimension to the ‘newness’ on offer to John Lewis customers.
It said Johnlewis.com outperformed the market with 27.2% growth. It said this has been achieved through increasing the number of products and brands and investing in click and collect. Next month the number of collection outlets will more than double to 116, including all 84 branches. Johnlewis.com accounts for 19% of total sales and it expects to achieve online sales of £1bn by 2014.
Overall, the John Lewis Partnership reported operating profit down 23.2% to £111.5m, and gross sales up 6.4% to £4.05bn.
John Lewis Partnership chairman Charlie Mayfield said: “Sales grew strongly although, as expected, profits were lower than in the same period in 2010 as we accelerated investment in our future growth plans, even though conditions remained extremely challenging.”
He said capital expenditure increased by £99m to £254m with investment.
“Trading conditions are set to remain challenging through the rest of this year and into 2012. We are not simply waiting for the recovery, but instead we have increased the pace of investment and innovation across the partnership putting us in the best possible position to seize the opportunity created by a rapidly changing retail environment.”