Profit at Britain's biggest department store group John Lewis Partnership was wiped out in the first half as it was forced to match discounting by its struggling rivals on a fiercely competitive high street.
The employee-owned group, which has rebranded its department stores John Lewis & Partners and its supermarkets Waitrose & Partners, reported a 99% slump in first-half profit before exceptional to £1.4 million, hit by its pledge to match prices and lower sales of big-ticket home items.
The group had warned in June that first half profits, which are always much lower and volatile than the second half, would be close to zero.
It indicated on Thursday that the second half of the year would also be tough going. "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 group as a whole," it said.
Profit at John Lewis's 50 department stores and home shops was squeezed by its "Never Knowingly Undersold" promise as other retailers discounted heavily and a decision not to pass on all the cost inflation from a weaker pound, it said.
Competitor Debenhams has issued a string of profit warnings and last month House of Fraser was bought out of administration by Sports Direct.
Cool Heads Required
John Lewis Partnership Chairman Charlie Mayfield said the group was "not hunkering down and going on the defensive".
"You don't succeed by retrenching so if anything we are investing more and pushing on with differentiation," he told BBC radio.
"The simple truth is that times like these call for cool heads and really determined ambition."
Its upmarket Waitrose supermarkets were on track to grow profit for the full year, it said, driven by a improvement in like-for-like sales from the first to the second quarter and progress in rebuilding its gross margin.
But the growth would be offset by continuing pressure in its department stores and the cost of investing in the business.
Gross sales at Waitrose were £3.39 billion ($4.42 billion) in the six months to July 28, up 2.6% on a like-for-like basis, it said, while sales at John Lewis were £2.09 billion, down 1.2% on the same measure. ($1 = £0.7671)
News by Reuters, edited by Donna Ahern. Click subscribe to sign up for the Checkout print edition.