John Lewis said on a statutory basis, half-year profits slumped 80.5% to Â£6 million.
It warned that it continues to expect profits in the full 2018-19 financial year also to be "substantially lower".
The group said that profits at the department store chain have continued to be hit by moves not to pass on price hikes to consumers from higher inflation, as well as the cost of new stores and IT changes.
Sir Charlie Mayfield, chairman of the John Lewis Partnership, said: "These are challenging times in retail."
He added: "Profits before exceptionals are always lower and more volatile in the first half than the second half.
"It is especially so this half year, driven mainly by John Lewis & Partners where gross margin has been squeezed in what has been the most promotional market we've seen in almost a decade."
"With the level of uncertainty facing consumers and the economy, in part due to ongoing Brexit negotiations, forecasting is particularly difficult but we continue to expect full-year profits to be substantially lower than last year for the Partnership as a whole," he added.