John Lewis Profits to Be Wiped Out Amid Price Competition
(Bloomberg) -- John Lewis Partnership Plc said profit in the first half will be “close to zero” before exceptional items as Brexit undermines consumer confidence and price competition with other U.K. retailers mounts.
With the U.K.’s planned departure from the European Union less than a year away, consumer confidence will suffer further in the second half, Chief Financial Officer Patrick Lewis said. The operator of John Lewis department stores and Waitrose supermarkets said it’s unable to give a precise annual profit forecast because of economic uncertainty, and it warned of disruption if the country leaves the bloc without an agreement in place.
“It’s become a battle between practicality and ideology and I hope practicality wins,” Chairman Charlie Mayfield said at a strategy day Wednesday. “Leaving with no deal is unthinkable because we are completely unprepared for it. The chaos that would ensue is something that no rational person would want.”
The announcement from John Lewis continues a run of bad news from U.K. store chains. Brexit is squeezing their costs and prompting consumers to keep closer tabs on budgets, compounding the damage from the rise of online shopping. Retailers like Marks & Spencer Group Plc and House of Fraser are accelerating store closures while others, like electronics seller Maplin, have collapsed.
Heavy discounting from struggling chains like House of Fraser and Debenhams Plc is undermining profit at John Lewis because of its commitment to match competitors’ pricing.
John Lewis said it will close one small supermarket and four convenience stores, with additional shutdowns expected “at a rate that’s in line with what we have seen over the last few years.”
The company said it’s taking steps to boost its balance sheet by 500 million pounds ($660 million) over three years to maintain investment. The employee-owned company plans to expand its online presence and add financial offerings and home services. The department-store arm wants to expand its lineup of own-brand and exclusive products to 50 percent of sales from 30 percent.
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