John Lewis swings to loss, warns of 'significant' hit from no-deal Brexit
Retailer John Lewis warned on Thursday that it would take a "significant" hit from a no-deal Brexit, as it swung to a first-half loss.
In the six months to 27 July, operating losses before exceptional items in the company's department store division widened 220% to £61.8m, but profits at Waitrose rose 14.69% to £110.1m, partly boosted by one-off profits from the sale of properties.
The improved performance at Waitrose was not enough to keep the group in the black, however, as it swung to an underlying pre-tax and bonus loss of £25.9m from a profit of £800,000 in the first half of last year, with revenues down 1.4% across the group to £4.78bn.
Troubles in its department store business reflect a shake-up in the sector amid changing shopping habits, which has seen the likes of both Debenhams and House of Fraser fall into administration during the last 18 months.
Chairman Charlie Mayfield said the loss was due to lower sales in homewares and electrical goods, as well as cost inflation and IT investment.
He also cautioned that retail conditions looked set to remain challenging and that the company would struggle in the event of a no-deal Brexit.
"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. "Brexit continues to weigh on consumer sentiment at a crucial time for the sector as we enter the peak trading period."
George Salmon, equity analyst 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.
"Weakness in big ticket purchases is particularly interesting because it implies consumers are factoring in Brexit uncertainty before splashing savings on large screen TVs or setting up repayment plans for new furniture. 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.
"There are a couple of positives for the group, however. Waitrose like-for-like sales have dipped, but not by as much as Morrison’s, where like-for-like retail sales dropped 1.1%. As well as that, the group increased market share in fashion & beauty, while net debt and the pension deficit both decreased. Still, these are tough times for the Partnership."