All the day’s economic and financial news, as the John Lewis Partnership is hit by tough UK retail environment
- Latest: Dominic Raab says firms should take more responsibility
- Breaking: John Lewis profits have slumped 99%
- Profits fall to £1.2m in the six months to 28 July
- Company blames ‘challenging’ conditions
- Coming up: interest rate decisions in UK, eurozone and Turkey
European credit analyst Tomas Hirst suggests Dominic Raab should resist the temptation to put the boot into British businesses — as the weak pound is causing real problems for importers.
Brexit is not the only cause of UK retail woes, but £ weakness did have a significant impact on real incomes, import costs. So dismissal of concerns by ministers not a good look. https://t.co/d6Iymil6zD
Easy to put the ideological blinkers on about this stuff – and perfectly possible Brexit not the main factor in the case of John Lewis – but right now the one thing Brexit *isn’t* for UK businesses is “convenient”
Seems to me @DominicRaab has a difficult enough brief without widening it to include snarking at underperforming UK high street names
Here’s a video clip of Dominic Raab criticising businesses who are “tempted to blame Brexit” for disappointing results:
Dominic Raab rubbishes John Lewis’s claim that #brexit is partly due to their fall in profits “There will be some temptation from businesses that aren’t doing so well to blame #brexit..” #Unbelievable #peoplesvote #FBPE pic.twitter.com/U1KlFCtoli
Britain’s Brexit secretary Dominic Raab has launched a stinging attack on John Lewis for daring to suggest that Brexit uncertainty is hurting.
Asked on the Today Programme about businesses’s concerns about the Brexit negotiations, Raab insisted that Britain’s economy was a sunny place:
“It’s probably rather easy at this moment in time for any business which isn’t doing rather well to point to Brexit.
But let me just give you the facts. This week we’ve had economic growth accelerating, we’ve had real wages accelerating…
We’ve had Anglo-Dutch firm Relx revise its structure to be based in the UK.
Actually inflation has come down to 2.5%, some people said it would hit 4%
I don’t doubt that uncertainty around these negotiations will have an impact on business. That’s why we are putting all our energy into getting the good deal that we want with our EU friends and partners, while making sure we manage the risks if it doesn’t happen.
John Lewis’s chairman, Charlie Mayfield, told the Today Programme that cost inflation has surged due to the weak pound (which is still 13% below its pre-referendum levels).
He also warned that Waitrose wouldn’t simply be able to stockpile all its food after Britain leaves the EU, explaining:
“The thing about stockpiling food (for Waitrose) is the stuff that’s most sensitive to these things is actually perishable, so you can’t really stockpile it, it rots, and you waste it. What we’re doing is we’re looking at all our import and export arrangements and so that we’re prepared as we can be.
“The other thing is we’re making sure the business is financially sound so we have the highest liquidity position in a long time, in terms of having cash and resources available because there’s so much uncertainty and you don’t know what’s going to happen, you don’t want to find yourself in a tight squeeze.
“I really hope it won’t (be a no-deal Brexit). I’ve said before that would be a very bad outcome for the UK and the consequences are extremely unpredictable.
John Lewis Partnership chairman Charlie Mayfield has taken to the airwaves with a rallying cry to staff and customers.
“You don’t succeed by retrenching so if anything we are investing more and pushing on with differentiation,.
The simple truth is that times like these call for cool heads and really determined ambition.”
John Lewis also warns that profits in the second half of the financial year (to the end of January 2019) will be sharply lower than a year ago.
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.
We expect profit growth in Waitrose & Partners will be offset by the continuing margin pressure in John Lewis & Partners and by incremental costs of investment.
John Lewis says its department stores suffered from falling demand for “big ticket and bespoke items”, as consumers cut back.
This dragged sales at its “Home” division down by 4.2%.
Here’s the top line from John Lewis today:
John Lewis’s pledge to match other retailers’ prices has also hit its bottom line this year.
The company says the plunge in profits…
…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.
Here’s some instant reaction to the John Lewis figures:
John Lewis Partnership profits, pre exceptionals down nearly 99% in the first half to £1.2m as the department store division falls to a loss.
John Lewis. Sales up, but profits down 99%. The business feels like it’s broken. Never knowingly unsold needs refining, badly.
The retail market is very volatile at the moment. Household name John Lewis has just announced a profit slump of 99% meaning only £1.2m profit made in first 6 months. Are costs rising or spending falling (or both)? #Retail #JohnLewis https://t.co/HOzFZVTzD1
Breaking: the John Lewis Partnership has seen its profits all-but wiped out in the last six months.
The group, which owns Waitrose and the John Lewis department stores, has reported a 99% slump in pre-tax profits (before exceptional items) to just £1.2m in the first half of the year. That’s down from aroud £83m a year earlier.
“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.
We’re continuing to improve our offer for customers while ensuring we have the financial strength to continue developing our business going forward.
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
It’s a huuuuge day for central bank news. Policymakers at the Bank of England, the European Central Bank and the Bank of Turkey are all meeting today to set monetary policy, and potentially unleash a few fireworks too.
A rate rise would be symbolic for the global financial community. One reason why the lira fell so sharply over the summer was partly due to fears about the political atmosphere and President Erdogan taking control of the central bank for his own economic benefit.
He spoke out vociferously against rate hikes, saying that higher interest rates did not dampen inflation, which goes against traditional economic theory. He also placed his son-in-law in the finance ministry, both things spooked investors’ and triggered the Turkish financial market crisis.
Credibility is the word – #Turkey‘s c. bank is expected to raise interest rates at Thursday’s MPC meeting. Predictions for the hike vary widely btw 225 bps to 725 bps. “The decision would reflect the prioritization of Turkish authorities’ concerns” https://t.co/ZGvrQHz0he