UK retailer shares drop

UK retailer shares drop

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UK retailer, John Lewis Partnership, said the weak pound and higher costs will squeeze its profit this year, in the latest sign of the deepening crisis on Britain’s shopping streets.

The department-store chain warned of further pressure on profits, after earnings-before-exceptional-items fell 22% in the latest fiscal year. The Ftse-350 General Retailers Index slid as much as 0.7%, with Tesco, Sainsbury’s, Next, and Marks & Spencer all lower at one stage.

The warning from the owner of UK grocer, Waitrose, adds to the distress among UK store-owners contending with the rise of Amazon.com and other online retailers, as the Brexit-induced weakness of sterling, and a rise in the minimum wage, lift their costs.

Toys ’R’ Us’s UK unit, and electronics chain, Maplin, have begun insolvency procedures, while apparel chain, New Look, is shutting stores and cutting jobs in Britain.

“We expect trading to be volatile in 2018-19, with continuing economic uncertainty and no let-up in competitive intensity,” John Lewis said. “We, therefore, anticipate further pressure on profits”. John Lewis cut the bonus it pays employees to 5% of salary, down from 6% a year earlier.

Like other UK retailers, John Lewis has been implementing more flexible working arrangements, in a bid to hold down staffing costs, amid increases in the UK’s minimum wage. The profitability of Waitrose dropped, as the company decided to improve its competitiveness by not passing on all cost inflation, instead lowering prices on hundreds of products.

It’s also been revamping stores, adding sushi counters, and other features, at Waitrose stores.
Waitrose is facing intense price competition from larger supermarket groups, Tesco, Sainsbury’s, Asda, and Morrison’s, as well as from fast-growing German discounters, Aldi and Lidl.

John Lewis said its department stores, however, fared better, with operating-profit-before-exceptional items up 4.5%, helped by stronger fashion and electrical sales.

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