John Lewis Partnership reported a widened first-half loss before tax and exceptional items of £34 million, an increase from £5 million a year earlier. This deterioration occurred despite stronger individual brand performances from both the eponymous department store chain and the upmarket grocer Waitrose. The increased losses were significantly impacted by tens of millions of pounds in new costs related to the UK's new packaging rules and higher employment taxes.
The company's executive chairman, Jason Tarry, had previously warned staff that worsening trading conditions were putting pressure on profits, with the outlook deteriorating faster than expected over the past six months. He indicated that the group was preparing for a period of "lower sales and higher costs" in 2026/27. For the year ending January 31, 2026, John Lewis Partnership had already reported a statutory pre-tax loss of £21 million, primarily driven by £120 million in exceptional charges, largely non-cash write-downs of legacy IT systems.
During the first half, specifically the six months to July 26, the company incurred £29 million in costs stemming from the new Extended Producer Responsibility (EPR) policy and increased National Insurance Contributions (NICs), split roughly equally between the two. These new tax and levy costs, which were not present a year earlier, amounted to approximately £53 million for the full year 2025/26, including £40 million from higher employer National Insurance contributions and £13 million from the packaging levy. As a large, people-heavy employer, John Lewis is also particularly exposed to rises in the National Living Wage.
Despite the challenges, the partnership has been focused on a turnaround, investing $108 million in base pay in 2026 and restoring a 2% staff bonus, equivalent to about one week's pay. The company's sales increased 5% to £13.4 billion for the year ending January 31, 2026, with adjusted profit before tax, bonus, and exceptional items rising 6% to £134 million. Waitrose notably outperformed the grocery market, with sales up 7% to £8.5 billion and adjusted operating profit rising to £256 million, while John Lewis sales grew 3% to £4.9 billion with an adjusted operating profit of £58 million. The company maintains a strong balance sheet with £1.6 billion in liquidity, allowing for continued self-funded investments.
Analysts like Zoe Mills from GlobalData suggest that the company's approach of protecting margins through tight stock control, rather than heavy discounting, could secure a "competitive edge." John Lewis typically earns the bulk of its profit in the second half of the financial year, particularly during the crucial Christmas period, and management is banking on strong sales during this time to achieve a full-year profit despite the first-half losses.
