John Lewis’ half-year pre-tax profits have crashed despite a modest rise in sales across the Partnership.

Pre-tax profits before exceptional items across the Partnership were down just 4.6% to £83m but they crashed 53% to £26m including exceptional items and property profits.

Across the Partnership, total sales rose 2.3% to £5.39bn. Sales at Waitrose and John Lewis climbed by the same proportion to £3.34bn and £2.07bn respectively.

Like-for-like sales were up 0.7% at Waitrose and 0.1% at John Lewis.

Chairman Sir Charlie Mayfield said restructuring and redundancy costs had hit the Partnership’s bottom line.

“Our results reflect the acceleration of our strategy to ensure the Partnership’s success in the future,” he said.

“This has included changing the way we operate Waitrose branches, creating new flexible team structures with broader responsibilities; further changes in John Lewis to adapt the business for the future; and moving from divisional to partnership functions across finance, personnel and IT.

“As a result, we incurred exceptional costs of £56.4m. Given the key role our partners play, we are very focused on managing the risk of these changes carefully.”

He added that while sales growth had continued in the first few weeks of its second half, John Lewis expected the headwinds that had put pressure on margins to continue into the next year.

He explained that those factors, as well as higher pensions accounting charges due to low interest rates, would affect full-year profits.

Mayfield warned that inflationary pressures driven by unfavourable exchange rates and political uncertainty had “dampened” consumer demand and put pressure on margins but that John Lewis had “chosen to hold back” on price increases across many areas.

The exception to this was at Waitrose, where “very few” price increases were passed to customers.

Strategy

John Lewis’ strategy to combat this difficult market centres on three main points: stronger brands and new growth; fewer but better paid, more productive partners; and financial sustainability.

At Waitrose, margins were hit by increasing cost prices but this increase in costs was largely offset by productivity improvements.

Head office costs were down 2.4% while in-store productivity was up, driven by a successful roll-out of the grocer’s flexible working programme. The scheme allows partners to work across the entire shop rather than focusing only on their category or department.

At John Lewis, new growth was generated by fashion, up 3.5%, driven by rises in womenswear (5.8%) and beauty (10%).

Home sales remained flat in a difficult market while electricals and home technology sales rose 2.5%, driven by a 10.4% rise in communication technology sales.

Online penetration, which is one of the highest in the industry, grew from 34.5% to 37.3%.