Brexit secretary Dominic Raab has clashed with John Lewis after its chairman Charlie Mayfield suggested the store’s 99 per cent plunge in profits was partly due to Brexit.
Profits at John Lewis plummeted to just £1.2m in the first half of this year amid what Mayfield called “challenging times” for retail. He also warned that full-year profits would be “substantially lower”.
“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,” he said.
Raab hit back saying it was easier for businesses to blame Brexit than to “take responsibilty for their own situation”.
“I don’t doubt that some of the uncertainty around these negotiations will have an impact on business — that’s why we are putting all our energy into getting the good deal we want with our EU friends and partners,” Raab said. “All I am just gently saying is that it’s rather easy for a business to blame Brexit and the politicians rather than take responsibility for their own situation.”
Mayfield said the store’s gross margin had also been squeezed by “what has been the most promotional market we’ve seen in almost a decade”.
“The pressure on gross margin has predominantly been from our commitment to maintain price competitiveness.”
He added that John Lewis’s price-match guarantee had increased pressure on the department store. Other burdens include the costs of new shops and higher IT costs from investment.
John Lewis isn't the only store to suffer. Marks & Spencer announced in May it would close 100 stores by 2022 with a further seven clothes store closures taking place last month. In August Mike Ashley's Sports Direct bought House of Fraser for £90m.
Mike van Dulken at Accendo Markets said: “The pledge ‘never knowingly undersold’ has come at a hefty price.”