Price cuts, pay rises eat into Lewis profits

The group, which will open its Northern flagship store in Leeds in five weeks’ time, said pre-tax profits​ ​fell​ ​to £82m in the six months to July 30.

​​John Lewis said Leeds is set to be ​its​ most forward thinking, experience-led store​ and will showcase the best Yorkshire products​ it can find​, ​including ​brands such as Mason’s Yorkshire Gin, Harrogate Candle Company and fashion brand Cabba. There will be over 120 products designed or created, within a 30-mile radius of Leeds.

​The store will also have the UK’s second ever John Lewis luxury spa offering over 120 treatments.

Speaking about the fall in profits, John Lewis c​hairman Sir Charlie Mayfield said ​it was not linked to the EU referendum result.

He said: “We have grown gross sales and market share across both Waitrose and John Lewis, but our profits are down. This reflects market conditions and, in particular, steps we are taking to adapt the partnership for the future.

“These are not as a consequence of the EU referendum result, which has had little quantifiable impact on sales so far.

“Instead there are far-reaching changes taking place in society, in retail and in the workplace, that have much greater implications.”

Sir Charlie added that the uncertainty of leaving the EU will remain, with the full impact yet to become clear, and said trading pressures are expected to continue through this year and next.

​John Lewis reported a ​£25​m write-down on property assets​ which was​ linked to ​its ​Waitrose ​subsidiary ​where​ ​the group has scrapped plans to open seven stores and will instead ​switch future investment​ ​to existing stores.

Waitrose​‘s​ managing director Rob Collins said: “We are aiming to turbo charge out investment in our existing estate and an important part of that is hospitality.”

Sales at the upmarket grocer ​rose 2.2​ per cent​ to £3.2​bn in the first half, but like-for-like sales fell 1​ per cent​ with the firm f​acing a “challenging” market.

Sales across the group ​rose 3.1​ per cent​ to £5.3​bn, but its pension deficit ​leapt 54.4​ per cent​ to £1.45bn as a result of historically low bond yields.

The partnership said it is committed to better salaries for its staff, flagging that it intends to ensure pay remains “well above” the national living wage. As a result, additional pay costs for its lowest paid staff will be £33​m higher than if it complied only with the national living wage.

It anticipates this will mean employing fewer staff over time, although the reduction will be “gradual”.

John Lewis has warned that the plunge in sterling could become a problem for the department store and, while the firm is “fully hedged” against currency fluctuations for 2016-17, it could become an issue next year.

On Thursday, John Lewis boss Andy Street warned there will be “modest” price rises by the middle of next year as the weak pound increases input costs. He has applied to become Conservative candidate for mayor of the West Midlands and will step down at the retailer if successful.

John Lewis​, which has stores in Sheffield and York, will ​open​ its new £150m flagship store in Victoria Gate in Leeds on October 20.

The store will have an in-store beauty spa concept, personal stylists, gait analysis, an “innovative coffee experience”, a home design team, customisable furniture, nursery advice, lingerie fitting, and holiday booking with travel firm Kuoni.

Head of branch, James Prince, said: “The way people shop is changing, and customers want shops to offer them more than just products.

“John Lewis Leeds will be our most service and experience-led shop to date.”