The John Lewis Partnership posted a near 99% slump in first-half profits as the company contended with heavy discounting by rivals.
The company, which owns the John Lewis department store chain and Waitrose supermarkets, reported pre-tax profit before one-off items of £1.2mln in the six months to July 28, down from £83mln the same period a year ago.
Chairman Charlie Mayfield said margins were squeezed by its price matching policy in the “most promotional market we’ve seen in a decade”.
“The pressure on gross margin has predominantly been from our commitment to maintaining price competitiveness,” he said.
“This reflects our decision not to pass on to our customers all cost price inflation from a weaker exchange rate and from our Never Knowingly Undersold promise, where we have seen an unprecedented level of price matching as other retailers have discounted heavily.”
Profits were also dragged lower by the costs of opening new stores and IT.
READ: John Lewis warns full-year profits will be hit by Brexit uncertainty as first-half profits halve
The John Lewis department store division was the worst performer, falling to a £19.3mln first-half loss compared with a £54.4mln profit a year ago. Revenue at John Lewis rose 0.7% to £1.6bn.
Waitrose profits dropped 12.2% to £96.4mln in the first half even as revenue increased 2% to £3.2bn with like-for-like sales up 2.6%.
Total revenue across the group edged up 1.5% to £4.8bn.
“These are challenging times in retail,” Mayfield said.
The group added that uncertainty facing consumers and the economy, in part due to ongoing Brexit negotiations, made it difficult to forecast trading for the next six months but it continues to expect full-year profit to be “substantially lower” than last year.