John Lewis Partnership warns tax rises deepened first-half losses, urges business rates reform

John Lewis Partnership reported pre-tax losses of £88 million in the six months to July 27, citing last year’s tax rises — including the new Extended Producer Responsibility (EPR) packaging levy and higher employer National Insurance contributions — as major contributors, and urged Chancellor Rachel Reeves to deliver meaningful reform of business rates.

The employee-owned retailer said the EPR, which shifts recycling costs from local councils back onto companies, added about £29 million of costs in the half. Higher employer NICs were also blamed for a portion of the deterioration in results. Sales rose 4% to £6.2 billion over the period, but the group recorded a wider loss than the £30 million it posted in the same period a year earlier.

John Lewis Partnership chief executive John Tarry said the business was making significant investments and that management expected a stronger second half driven by peak trading, including Black Friday and the Christmas season. "The investments we are making, combined with our plans for peak trading, provide a strong foundation for the remainder of the year," he said. "While we are reporting a loss in the first half, we're well positioned to deliver full year profit growth, which we'll continue to invest in our customers and Partners."

The group, which employs about 66,000 Partners, said it was too early to confirm whether employees would receive a bonus for the first time in four years; any award will depend on performance in the current second half. The retailer invested £191 million in the first half, launching new in-store "beauty halls" and rolling out refreshed fashion ranges aimed at drawing customers from rivals such as Next and Marks & Spencer.

Tarry told reporters that business rates remain one of the company’s largest non-pay costs and urged the government to follow through on promised reforms. He said he took part in a meeting at Number 11 in which retail leaders pressed the Chancellor to make business rates reform the sector’s top priority. "Business rates was our number one priority," he said, adding that the meeting had been "constructive" and that the group would "react accordingly" when the government sets out more details.

Retailers face a potential increase in taxes on larger properties under proposed reforms, a change that analysts say could disproportionately affect department stores and other firms with large physical footprints. John Lewis said the proposed changes could leave some businesses more exposed, heightening the importance of clear government plans.

Peter Ruis, managing director for John Lewis, acknowledged the pressure on household budgets from energy and wider inflation but said market research suggested customers were modestly more confident heading into autumn and the festive period after recent mortgage rate reductions. "I wouldn't want to underplay that we are seeing considerable cost increases for our customers, be it energy pricing or general inflation," he said. "However, the John Lewis customer has likely benefited from recent mortgage cuts and appears slightly more confident coming into this autumn and Christmas period than they were over the last six to 12 months."

The retailer returned to profit last year after a series of pandemic-era losses and a cost-cutting programme, but the first-half results underline the sensitivity of margins to tax and regulatory changes. The EPR has proved controversial across the sector because it reallocates recycling costs, while higher employer NICs have added to labour costs at a time when staffing remains the company’s biggest expense after business rates.

The wider retail sector has signaled mixed signals about consumer spending. Several chains, including Greggs, JD Sports and Primark, have warned of softer consumer sentiment, but John Lewis executives said they saw early signs of resilience among their core shoppers. The group is relying on peak-season trading and continued investment in stores and product ranges to restore profitability for the full year.

The government has yet to publish detailed proposals on the business rates changes referenced by retailers. John Lewis said it would assess any formal plans and respond once the details were available. In the meantime, management intends to press ahead with investments designed to strengthen the brand ahead of the crucial holiday trading period.