John Lewis warns of no-deal Brexit impact

John Lewis has fallen to a half-year loss and says a no-deal Brexit will have a “significant” impact. The retailer said while it had prepared for no deal, it could not fully offset the effect and the impact on fresh food supplies was a concern.

The stores group, which also owns Waitrose, reported a loss of £25.9m, down from a profit of £0.8m last year. Sales slipped amid “difficult” trading conditions, which were not helped by “subdued consumer confidence”.

John Lewis pointed to “soft demand” for its home and electrical goods as a particular weak spot.

The partnership, which normally makes most of its profits in the second half of the year, said it had been making preparations for a no-deal Brexit, including building up stocks “where that is sensible”.

However, the partnership’s chairman, Charlie Mayfield, said: “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.

“Brexit continues to weigh on consumer sentiment at a crucial time for the sector as we enter the peak trading period.”

He said the group was worried about the impact of a no-deal Brexit on fresh food supplies and consumer confidence.

“Ultimately, that could have a knock-on impact on profits,” he said. “That could be significant.”

Salary increases and an IT overhaul also ate into the group’s profits, John Lewis said.

Amid what it described as a “weak grocery market” sales at Waitrose slipped slightly to £3.4bn in the six months to 27 July.

However, the supermarket chain also reported a 10.7% growth in online sales, which the partnership said was “well ahead of the market”.

At the John Lewis department store business, total sales were £2.1bn, down 1.8%.

“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,” said Hargreaves Lansdown analyst George Salmon.

“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.”

John Lewis plans to reach more customers by expanding its network of “click and collect” points at Co-op stores.

In May, the department store announced that online shoppers would be able to pick up their purchases at six Co-op stores as part of a trial. John Lewis now plans to extend that to another 50 by the end of October.