John Lewis Partnership has posted a 26% slide in half-year profits after being hit by costs of its staff pension fund and warned full-year results would also be sharply lower in a tough retail market.

It said trading at its Waitrose supermarket chain came under pressure amid "turmoil" in the sector, with comparable store sales down 1.3% - the first fall for seven years.

The partnership said underlying profits sunk to £96 million in the six months to August 1 as recent stock market woes impacted its pension fund and left it facing higher charges.

It said that after stripping out these costs and one-off boosts from property sales last year, trading profits were broadly level in the first half as a 3% rise in sales at its department store chain helped offset the supermarket woes.

But it said supermarket trading was set to remain tough as the major players wage a fierce price war to compete with the increasing might of discounters Aldi and Lidl.

The difficult trading and an extra £60 million of pension fund charges this financial year are expected to drive annual pre-tax profits to between £270 million and £320 million against £342.7 million previously.

Sir Charlie Mayfield, chairman of John Lewis Partnership, said: "Conditions in the market will remain difficult, especially in grocery where there is little sign of any price inflation."

He added: "For the full year, pension charges will be approximately £60 million higher than the comparable figure last year, predominantly arising from volatility in the market-driven assumptions.

"In the current market, even a strong trading performance is unlikely to offset this fully."

The figures come as John Lewis battles to plug a £1.12 billion hole in its company pension fund, with recent heavy falls in equity markets hitting the fund further.

John Lewis said the deficit had shrunk by 7.4% or £92.7 million since January, but its funding costs will still rise over the full year.

The group, which is employee-owned, is moving to a combined defined benefit and defined contribution pension to cut its soaring costs for the scheme.

It said: "The pension continues to be one of the most important benefits offered to partners, but it also accounts for the greatest single investment made each year by the partnership."

Half-year figures showed its 44-strong department store business suffered a 16.3% slide in earnings to £47.1 million, while shop sales excluding johnlewis.com fell 1.8% - ending four years in a row of growth.

The group said the sales fall came as it faced tough comparisons with a year earlier, when trade was boosted by its 150th anniversary celebrations.

The Waitrose arm, which has 340 stores, grew earnings by 0.6% to £135.5 million as it kept a tight lid on costs, although the group said it struggled against "falling prices and changing customer shopping patterns".

Its online supermarket sales fell 13% year-on-year in the first half.

The sales fall at Waitrose - the first since the group's 2008 interim results - comes as the entire sector struggles against tough conditions.

Half-year results also out from Big Four rival Morrisons showed profits falling 47% while like-for-like sales for the period dropped 2.7%.

Despite falling sales, Waitrose managed to increase its market share to 5.1% in the latest industry data from Kantar Worldpanel, up from 4.9% a year earlier, while its four main competitors suffered declines.

But Julie Palmer, partner at business turnaround specialists Begbies Traynor, said it has been a "difficult summer" for John Lewis Partnership.

She added: "Today's results from the high street retailer suggest wider concerns, with a slump in profits reflective of harsher trading conditions and higher pension charges.

"Waitrose's poor sales performance has shown that it is not immune to the vicious price war dominating the sector."