The retailer, which also owns the Waitrose chain, said first half pre-tax profits plunged by 18 per cent to £90.4m.
Its Never Knowingly Undersold pledge – meaning that they will offer the lowest prices on the market – contributed to the fall as retailers cut their prices to boost sales.
The drop in profits in the six months to 30 July at John Lewis and Waitrose came as the partnership increased total sales by five per cent to £3.6bn.
Sales growth was strongest at Waitrose, where like-for-like sales – a measure that strips out the impact of new store openings – increased four per cent year on year.
Chairman Charlie Mayfield said profits were affected by “our commitment to Never Knowingly Undersold and a highly competitive trading environment.” The partnership also reported a 65 per cent increase in investment with a £253.8m injection into new formats and branches, including the Westfield Stratford store close to the Olympic park.
A dozen more Little Waitrose branches are planned for the second half as well as two new John Lewis home shops.
Mayfield added: “Sales grew strongly although, as expected, profits were lower than in the same period in 2010 as we accelerated investment in our future growth plans.
“We are not simply waiting for the recovery, but instead we have increased the pace of investment and innovation across the partnership... Our momentum is strong.”
The company said Waitrose had managed to absorb the impact of price inflation rather than passing it on to customers.