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John Lewis profits plunge

Sales and revenue up but business rates at Oxford Street flagship also soar


AS JOHN Lewis Partnership reported a 98.8 per cent drop in profits, it has also been revealed that business rates at their Oxford Street flagship store are about to rise by £15million.

It was reported yesterday, Thursday, September 13, that underlying pre-tax profits plunged to £1.2m for the six months to July 28, while gross sales rose 1.6 per cent to £5,486.6m with revenue up 1.5 per cent to £4,856.7m.
Profit before tax fell 80.5 per cent to £6m, while total net debts were £700m lower than the same period a year before.
And today, Friday, September 14, Retail Gazette have reported real estate advisors Altus Group as saying the Oxford Street store will pay £41.01m in business rates over the next four years, until the next revaluation in 2021.
That means John Lewis will be forced to pay an extra £14.82m compared with the 2016-2017 tax levels, given the change in rateable value.
With the third highest rates bill for a store behind Harrods and Selfridges’ London outlets, John Lewis’ Oxford Street flagship are paying £10.21m for the current year, up £3.65m from £6.56m in 2017, the last year before the revaluation came into effect.
“These are challenging times in retail. Our profits before exceptionals are in line with what we said they would be at our Strategy Update in June,” John Lewis Partnership chairman Sir Charlie Mayfield said yesterday.
“We’re continuing to improve our offer for customers while ensuring we have the financial strength to continue developing our business going forward. This is reflected in both brands continuing to grow sales and customer numbers, and our total net debts reducing.”
Sir Charlie pointed out the profits before exceptional items are always “lower and more volatile” in the first half than the second, “especially so this half year, driven mainly by John Lewis & Partners where gross margin has been squeezed in what has been the most promotional market we’ve seen in almost a decade”.
He added: “The pressure on gross margin has predominantly been from our commitment to maintain price competitiveness. 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 had dipped year-on-year, but Sir Charlie said: “From Q1 to Q2 there has been marked improvement in like-for-like sales as well as good progress in rebuilding gross margin, and we are on track for profit growth for the full year.
“With the level of uncertainty facing consumers and the economy, in part due to ongoing Brexit negotiations, forecasting is particularly difficult but we continue to expect full year profits to be substantially lower than last year for the Partnership as a whole.”

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