John Lewis Partnership reports widened half-year losses as packaging and payroll costs bite

The John Lewis Partnership said losses before tax and exceptional costs nearly tripled in the first half of its financial year, as a new packaging levy and higher employer National Insurance Contributions (NICs) added to the cost of turning the business around.

Losses widened to £88 million in the six months to 26 July from £30 million a year earlier, the employee-owned group — which operates John Lewis department stores and supermarket chain Waitrose — said on Thursday. The partnership said it incurred £29 million in additional expense in the period as a result of the government’s Extended Producer Responsibility (EPR) policy, which shifts the cost of waste packaging from local authorities to producers and retailers, and higher employer NICs; the charge was roughly equally split between the two measures.

Chair Jason Tarry said there was "no doubt that consumer confidence is subdued" ahead of the November Budget but reiterated the group expects to return to profit in the second six months of the financial year, which includes the crucial Christmas trading period. "Our customer‑led plan is working," he said, pointing to stronger Waitrose sales and anticipated demand for seasonal gift items. "It's going to be a huge Jellycat Christmas," he added.

Waitrose reported a 6% rise in sales to £4.1 billion in the half, and total group revenue increased 4% to £6.2 billion. The partnership said it continued to invest in a long-running turnaround programme to win back customers after the pandemic and amid intensified competition from other retailers.

The group has not paid its annual staff bonus for three years. Tarry said the partnership remained committed to restoring the bonus "as soon as we possibly can" but that it was "far too early in the year" to set a timeline.

The Bank of England has previously warned that the EPR levy could add up to 0.5% to food prices if retailers pass the full cost to consumers. John Lewis was among a number of British retailers that last year warned that increases in employer NICs and other measures announced in the Budget could lead to higher prices and job cuts.

Analysts said efforts to sharpen the retailer's competitive position have shown some effect. Zoe Mills, lead analyst at GlobalData, said bringing back the "Never Knowingly Undersold" price promise last year "allowed the company to secure a competitive edge," and added that knowledgeable staff offering product advice in areas such as electronics and cosmetics could continue to attract customers.

John Lewis’s wider programme includes measures to improve store performance and online offer, while managing costs through the year. The partnership’s expectations for a return to profitability hinge on stronger festive trading and continued recovery in customer footfall and spend.

The results offer an early look at how policy shifts and labour cost changes announced in last year’s Budget are affecting major retailers. The company’s performance over the coming months will be watched closely by investors, staff and policy makers as the industry adapts to the new packaging regime and the lingering effects of subdued consumer sentiment.