Multi-channel retailer John Lewis Partnership has reported a decline in profit, although furniture sales continued to drive its Home performance as John Lewis builds towards a £1bn own brand business category.
According to the Partnership’s interim results for the first half year ended 30 July 2016, which included both its John Lewis and Waitrose markets, total sales reached £5.27bn, up by 3.1%, with sales at John Lewis swelling by 4.5% to £2.02bn and like-for-like sales increasing by 3.1%.
Despite the uptick in sales, the Partnership saw pre-tax profits tumble by 14.7% at £81.9m as the group responded to ‘deep structural changes’ in the retail market, as well as increasing pay and higher financing costs, whilst confirming that the outcome of the EU vote had ‘little quantifiable impact’ on performance.
John Lewis saw Home sales rise by 3.7%, driven by furniture, up by 6.8%, with beds up by 13.7%, as it also continued its roll-out of its West Elm concept, which is now in seven stores.
The Partnership indicated that overall sales across the John Lewis’ department store estate fell by 1%, whilst online sales continued to perform strongly, representing 34.5% of transactions, growing from 30.6% last year.
Despite growing sales, operating profit fell by 31.2% to £32.4m, with more than half of this decline due to ‘transitioning costs in its distribution network’ as it ‘temporarily maintain legacy sites to smooth the transition to Magna Park, and increases in pay to maintain differentials’.
Stated in the report, John Lewis said: “The balance of the reduction reflects the continued shift to online and a market dynamic of competitive pricing, both of which we expect to continue into the second half.
“Against this backdrop we remain committed to delivering our strategy and the first half saw record capital investment in the essentials of omnichannel trading as we go into our most important peak trading period.”
On the international front, John Lewis said it would continue to roll out its wholesale model with ‘shops-in-shops’ in Australia and Ireland opening next year, bringing its global locations to 29, whilst expanding the number of countries where johnlewis.com delivers to, now at 40.
Looking ahead the Partnership has experienced gross sales growth of 3.8% for the first six weeks of the second half of the year, with John Lewis revenue up 2% on the same period last year but indicated that although it ‘expects to trade well’, the structural changes in retail ‘will not ease’.