John Lewis profit bombshell

Stormy times at John Lewis as profits plummet

Department store group John Lewis is attempting to blame a 43 % drop in half-year profits on a £20m 'one-off' spending spree.

The unlisted company - which has a unique ownership structure - is refusing to panic at today's half-year figures.

It points to an unusually high number of 'one-off' items and tough trading conditions in the north of England to account for the dramatic fall.

John Lewis chairman Stuart Hampson

The group saw pre-tax profits plummet to £38.5m on a turnover of £1.9bn. Exceptional items came to £20m, compared to £3m for the previous trading period.

John Lewis employees receive a bonus based on the size of the company's profits - so the news will affect their pay packet.

'Sales forging ahead'

Extra costs included the conversion of 11 former Somerfield stores in the South West to Waitrose outlets and £6m back holiday pay it owed to staff.

The company also wrote off £4m during the refurbishment of its Peter Jones store in London's exclusive Sloane Square, which is costing a total of £80m.

Following adjustments, the high street giant claims its profit drop is actually 18% and sales are now forging ahead.

According to its own weekly figures, sales were 14.2 % higher year-on-year in the week to 2 September in John Lewis' 25 department stores, while food group sales were 12.8% ahead.

North/South divide

John Lewis is one of the country's largest department store chains, with 50,000 employees.

In the past it has been singled-out by the Government as an example of a 'stakeholder' business.

There is a contrast between confident trading in many of the southern-based shops and the tougher conditions faced elsewhere in the UK

John Lewis spokesman

In recent years it has expanded out of its southern heartland to open stores as far afield as Glasgow.

But chairman Stuart Hampson claims a growing north/south divide in trading conditions has held profits back.

A company spokesman says: "There is a contrast between confident trading in many of the southern-based shops and the tougher conditions faced elsewhere in the UK,"

Overall sales on the high street picked up last month, according to official figures published this week.

The Office for National Statistics reported retail sales in August grew by 0.6% - stronger than the City was expecting - and stand 4% up on the year.

The figures showed for the three months to the end of August the volume of sales was up 1.1% than in the previous three months and 4.2% higher than in the same period a year earlier.