John Lewis reports 14.7% fall in profits amid 'deep changes' in retail market
John Lewis Partnership has posted a 14.7% slide in half-year pre-tax profits to £81.9 million, citing "deep structural changes in the retail market".
The group, which also owns Waitrose, said its commitment to competitive pricing, increasing pay and investment held back profits in the six months to July 30.
Chairman Sir Charlie Mayfield said the results were 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.
After exceptional items, including a £25 million write-down on property assets that it no longer intends to develop, pre-tax profits in the period plunged 75% to £56.9 million.
The write-down is linked to Waitrose where, following a strategic review, the group has scrapped plans to open seven stores and will instead be "re-prioritising future investment spend towards existing stores".
Waitrose 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 increased by 2.2% to £3.2 billion in the first half, but like-for-like sales fell 1% with the firm flagging a "challenging" market.
British supermarkets are embroiled in a bitter price war as they slug it out to win back market share and compete with German upstarts Aldi and Lidl.
Operating profit at John Lewis stores fell 31.2% to £32.4 million and dropped 28.9% to £96.3 million at Waitrose during the period.
Sales across the group were up 3.1% to £5.3 billion, but its pension deficit ballooned 54.4% to £1.45 billion as a result of historically low bond yields.
The partnership also 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 million 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 earlier this year 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.
After months of speculation, Mr Street last week announced he had applied to become Conservative candidate for mayor of the West Midlands and will step down from his role at the retailer if successful.