John Lewis has said its losses nearly tripled in the first half of the year, fuelled by the new cost of dealing with waste packaging and increased National Insurance Contributions (NICs).
The employee-owned company, whose shops include the John Lewis department stores and Waitrose, said losses before tax and exceptional costs increased to £88m from £30m a year earlier.
John Lewis Partnership chair Jason Tarry, said there was “no doubt that consumer confidence is subdued” ahead of the Budget in November.
But the firm expects to return to profit in the second six months of its financial year, which includes the key Christmas season.
John Lewis Partnership said it spent £29m on a combination of the new Extended Producer Responsibility (EPR) policy – where waste packaging costs have shifted from local government to retailers and producers – as well as higher NICs.
It also incurred costs on a long-running programme to turn the business around.
The Bank of England has previously said that the EPR levy could add up to 0.5% to food prices if retailers pass the full cost onto customers.
The £29m cost in the six months to 26 July was roughly equally split between the packaging levy and employer National Insurance payments.
Last year, John Lewis was one of a number of British retailers that warned prices would rises and there would be “inevitable” job losses because of measures announced in last year’s Budget which included the change to NICs.
Commenting on the outlook for the economy and the upcoming Budget, Mr Tarry said: “There’s no doubt consumer confidence is subdued.
“We’ll focus on what we can control.”
He is predicting that the company expects to return to the black “in the run up to Christmas”.
“Our customer-led plan is working,” he said, adding that the company expects strong sales for Christmas gifts such as wearable tech and Jellycat soft toys.
“It’s going to be a huge Jellycat Christmas,” he said.
Waitrose sales rose by 6% to £4.1bn, and Mr Tarry said he expected customers would want to treat themselves over the festive period.
Total revenue across the partnership increased by 4% to £6.2bn.
Mr Tarry said that John Lewis was committed to paying its staff bonus “as soon as we possibly can” but it was “far too early in the year” to say when that would happen.
Staff at John Lewis have not received a bonus in three years.
John Lewis has made efforts in the past few years to win back customers after the pandemic and increased competition from other retailers.
It brought back its Never Knowingly Undersold price promise last year, two years after abandoning it.
Commenting on the company’s results, Zoe Mills, lead analyst at GlobalData, said this allowed the company to secure a “competitive edge”.
She added that John Lewis could continue to attract customers by offering staff with good knowledge of their products who can offer trustworthy advice and recommendations in areas like electronics and make-up.
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