John Lewis customers spend less as inflation biteson September 15, 2022 at 8:05 am

John Lewis customers are cutting back on the amount they spend in its department stores and at its supermarket Waitrose due to the rising cost of living, the company has said.

The retailer said while shopper numbers were higher than last year, customers were spending less.

The company reported a loss of £99m in the first half of its trading year.

Its boss, Dame Sharon White, said the company had faced “unprecedented” cost inflation across groceries and goods.

She said customers were less likely to splash out on “big ticket” household items and were moving their spending to dining out at restaurants and to holidays.

“No one could have predicted the scale of the cost of living crisis that has materialised, with energy prices and inflation rising ahead of anyone’s expectations,” said Dame Sharon.

“As a business, we have faced unprecedented cost inflation across grocery and general merchandise.”

However, she said it was “not unusual” for the John Lewis Partnership to report a loss in the first half of the year as its trading is “heavily skewed” to Christmas, with most of its profits made in the final months of the year.

In the first half of last year, the partnership reported a loss of £29m.

The company said its losses this year were due to a combination of rising wholesale prices for goods not being passed on to customers, households cutting back on spending, and the “unwinding” of Covid shopping habits.

At John Lewis, fashion sales increased as people shopped for travel and summer breaks. However, revenue from its home and technology ranges, which performed well during the height of the pandemic, declined.

The company said the impact of the rise in the cost of living, specifically around energy costs, was “evident in patterns of spending”, with sales of its own-brand items rising 28% and energy saving goods, such as air fryers and smart thermostats, increasing.

Dame Sharon said the outlook for the rest of the year was “highly uncertain owing to the cost of living crisis and its impact on discretionary spending as well as criticality of our Christmas trading period”.

She said a successful Christmas was “key for the business”, adding a bumper festive period beyond previous years was needed to “generate sufficient profit” for the company to be able to pay staff their usual bonus.

On Thursday, sofa shop DFS Furniture also reported slumping annual profits due to a dip in consumer spending, while H&M reported lower-than-expected quarterly sales as shoppers tighten their belts.

Overall UK inflation, which measures the rate at which prices rise, is running near a 40-year high,but the rate eased for the first time in almost a year in August, slipping to 9.9% from July’s 10.1%.

Food prices have been increasing around the world following Russia’s invasion of Ukraine, which has been one of the factors pushing up prices at supermarket tills, and Waitrose said its sales were down 5% on last year, with basket sizes “smaller by nearly a fifth”.

The Bank of England has warned inflation could top 13% this year, and is expected to keep raising interest rates in a bid to control it.

Dame Sharon previously told the BBC that an exodus of over-50s who left the workforce during the Covid pandemic had fuelled wage inflation.

She called on the government to think “really hard” about how to get more older people back into work.

The UK has seen one million people, mostly in their 50s, leave work since the start of the Covid-19 outbreak, with job vacancies at a record high.

It has meant employers who want to attract and retain staff are under pressure to lift wages, which in turn fuels inflation.

John Lewis is among many stores that will close in order to mark the Queen’s funeral on Monday.