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John Lewis to the rescue

Solid department store gains, bolstered by a pretty strong performance on its fashion floors, offset very tough trading conditions for its supermarkets. That was the story for the combined John Lewis Partnership in H1 as overall profits were hit by some hefty staff pension fund costs.

That meant the UK group posted a 26% slide in H1 profits to £96m and warned full-year results would also be sharply lower in a tough retail environment. Overall revenues for the period grew 1.9% to £4.5bn.

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

However, its chairman Sir Charlie Mayfield said Thursday morning on the BBC the group was seeing trading improvements into September giving him “hope” of a better H2.

So let’s concentrate on those department store figures. “Solid” sales for the half rose 3% to £1.94bn with comp sales also up 3% as stronger fashion and home directorates offset slower EHT (electricals). Online sales grew 17.1% to £647m.

Fashion was the “standout performance”, up 7.5% year-on-year, John Lewis noted.

“Our strategy of combining an ambitious John Lewis own-brand offer with the best of other brands is continuing to pay dividends,” it added.

Menswear grew a “particularly strong” 10.5%, with John Lewis Kin tailoring up 23.9%.

Sales in Home rose 4.9% – a good performance against the impact of the General Election and a late start to summer sales. Outdoor living was up 33.5%. Own-brand continues to be its star performer with its newest range, Croft, achieving an increase of 87.5%.

In EHT, sales fell 0.7% against strong figures from the same period last year and impacted by a lack of new product launches in the home technology market.

Operating profit fell 16.3% to £47.1m, impacted by restructuring and other costs related to omnichannel improvements.

“We continued to outperform both the BRC and IMRG – a good performance in the context of lower consumer confidence at the beginning of the year,” John Lewis said.

“The results are also achieved against a strong spring/summer season last year, with 2014 boosted by our 150 Year anniversary promotions and exceptional demand for Electricals and Home Technology (EHT) products in the run-up to the FIFA World Cup.

In his overview, Mayfield added: “Conditions in the market will remain difficult, especially in grocery where there is little sign of any price inflation. However, I expect sales in both Waitrose and John Lewis to perform comparatively well against the market, helped by promising new ranges and online capability.”

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