John Lewis issues no-deal Brexit warning

John Lewis' Northern flagship store in Leeds
John Lewis' Northern flagship store in Leeds
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John Lewis has warned that a no-deal Brexit would have a significant impact on the group, which it would not be able to offset.

Sir Charlie Mayfield, outgoing chairman of the John Lewis Partnership, said: “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.

“Brexit continues to weigh on consumer sentiment at a crucial time for the sector as we enter the peak trading period.”

The comments came as the firm reported an underlying pre-tax loss of £26m in the six months to July 27 - its first ever half year loss - down from profits of £800,000 a year earlier as it warned trading conditions remain difficult.

The group, which has its Northern flagship store in Leeds and two other stores in York and Sheffield, said while most of its annual profits are made in the second half of the year, it expects trading to remain challenging.

Sir Charlie’s comments came after the Government was forced to release its “worst case scenario” plan for a no-deal Brexit, code named Operation Yellowhammer.

It showed that no deal could trigger medical shortages, food price rises and major cross-Channel trade delays.

Sir Charlie said the group’s no-deal Brexit fears centred on the impact on fresh food supply and consumer confidence. The group also owns Waitrose.

He said: “Ultimately, that could have a knock-on impact on profits. That could be significant.”

The group is building stocks where it can in some non-perishable foods, such as wine, olive oil, canned food, as well as frozen items.

Sir Charlie said trading conditions had “worsened” in 2019 and would continue to be challenging over its peak sales period as Brexit takes its toll.

The group said the half year loss was driven by operating losses at its John Lewis department store chain, which increased to £62m from £19m a year ago as it suffered falling sales, surging costs of an IT overhaul and increasing cost inflation.

Like-for-like sales fell 2.3 per cent across the department stores, following weaker demand for big ticket home and electrical items.

Waitrose performed better, with underlying earnings increasing 14.7 per cent to £110m, although comparable sales fell 0.4 per cent.

The partnership’s results showed on a statutory basis, pre-tax profits jumped to £191.5m from £6m a year earlier, but this included one off items and were flattered by accounting changes.

Analyst George Salmon at Hargreaves Lansdown, said: “After a disappointing end to last year, and the well-documented problems at fellow department stores Debenhams and House of Fraser, it’s no surprise to see John Lewis’ like-for-like sales and profits falling.

“The group has warned of the damage a no-deal exit could do, and since that could come in the run-up to Christmas, the timing couldn’t be worse.”