By Kristy Dorsey

Profits at John Lewis Partnership recovered during the first half of the year as the retailer benefitted from £58 million in government rates relief, however there remains “significant uncertainty” about trading and shortages ahead of the crucial festive period.

The group behind the John Lewis department store and Waitrose supermarket chains said its performance was ahead of expectations, with profits of £69 million before exceptional items during the six months to July 31. This was up from a loss of £52m in the same period two years earlier, prior to the pandemic.

More than half of £98m of exceptional items were linked to redundancy and restructuring costs as about 300 people left the business during the six months. A further £24m was spent settling lease obligations from the closure of eight John Lewis shops.

Including these exceptional items, the partnership made a pre-tax loss of £29m, a significant improvement on last year’s £635m crash into the red as it wrote nearly £500m off the value of its department stores because they were no longer profitable.

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Although trading is stabilizing, the group noted that its profitability is weighted towards the second half of the year because of Christmas, “especially in John Lewis”.

“As we look ahead, there is significant uncertainty. Like the whole of retail, we are managing global supply chain challenges and labour shortages. We are seeing inflationary pressures, which we expect to persist.”

In a letter to staff, known as “partners”, chairman Sharon White acknowledged that closures and job losses have been “painful” for the group, which is looking to shed more than 2,500 staff in total. Cost savings of £66m were achieved in the first half of the year.

The results come a day after John Lewis said it will hire 7,000 temporary workers for the Christmas trading period, 2,000 more than last year. In a bid to ensure it attracts the staff it needs amid a growing shortage of labour, it is offering free food and drinks to all permanent and part-time workers from October 4 to December 31.

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Sales at Waitrose were up 2% on the same period a year earlier at £3.8bn, driven primarily by online growth. Online now accounts for 17% of sales, up from 11% a year ago but back a bit from 20% in March of this year.

The supermarket chain’s partnership with Deliveroo has expanded from 40 to 150 shops with a potential reach of up to 13 million customers. This is now generating sales of almost £1m per week, and is proving particularly popular among younger customers.

However, a combination of pandemic-related costs and online growth diluted margins, with operating profits falling by 10% to £525m. The group said it is attempting to address this through investment in stock management systems, delivery charging and other efficiencies.

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Despite store closures, sales across the John Lewis chain were 12% higher at £2.01bn. Almost three-quarters of sales were online, broadly in line with last year but significantly ahead of the pre-pandemic level of 40%.

Margins also rebounded strongly with a return to what the partnership described as a “more balanced pattern of trade: fewer laptops, more lamps and linen sales”. Operating profits almost doubled to £295m.

Customers are typically returning to stores for larger purchases such furniture and beds, and “take with you” items like stationery and gifts. For the period that shops were open in the first half of the year, like-for-like sales were about 20% lower compared to two years ago.

The group did not pay out an annual staff bonus this year and has said it will not do so until annual profits exceed £150m. The board said it will take a decision on whether to award a bonus for the current trading year “in the usual way” in March 2022.