The John Lewis Partnership’s slump in profits and resulting decision to cut staff bonuses comes as retailers across the board struggle with volatile trading conditions and consumer confidence.
The group is far from alone in reporting that it has struggled to balance cost pressures from the weak pound with remaining competitive, and has added to warnings that it sees little let-up ahead.
Last week the collapse into administration of two major UK chains – electronics company Maplin and Toys R Us – on the same day laid bare the high street’s struggle to adapt to falling consumer spending and rising inflation.
This week New Look added to the high street’s dismal start to 2018 with its announcement that it was looking to close nearly 10% of its 593-strong UK store estate.
Deloitte partner Daniel Butters, who is handling the New Look company voluntary arrangement, said the retail trading environment in the UK remained “extremely challenging, driven by weaker consumer confidence, the implications of Brexit and competition from online channels”.
The beginning of the year saw the first January drop in consumer spending since 2013 and a sharp 4% fall in spending on the high street, according to Visa, as Britons continued to cut back on spending.
And latest Office for National Statistics figures showed British retailers barely scraped a rise in sales at the start of the year, with the agency’s senior statistician Rhian Murphy describing the long-term diagnosis for the retail sector as one of a “continued slowdown”.
A string of high-profile retailers warned over profits at the start of the year after failing to churn out bumper sales during the crucial Christmas trading period.
Soaring business rates, National Living Wage costs and the Apprenticeship Levy have also taken their toll.
Richard Hyman, who has analysed the retail sector for more than 30 years and predicted last year that 2018 would be “the year of retail distress”, has said: “There are too many mouths to feed and the consumer economy is in a very weak condition and has been for a very long time, and there is no evidence of that changing.”
Economists are expecting some relief for high street shoppers as inflation eases and wage growth picks up pace, but political uncertainty is likely to mean that the retail sector remains under intense pressure.