John Lewis to continue investing despite profit fall

A John Lewis store is seen in a handout photo.

LONDON (Reuters) - Department stores and grocery retailer John Lewis JLP.UL will continue to cut prices and invest to maintain its competitive position, despite a fall in first-half profit, its finance director said on Thursday.

Marisa Cassoni also told Reuters the employee-owned group hadn't given up on growing profits over the full financial year.

"Two-thirds of our profits come through in the second half and it's far too early to tell what the (full-year) outturn will be," she said in a telephone interview. "We see plenty of opportunity going forward to maximise our profit."

Earlier, John Lewis posted a 27 percent drop in pretax profit to 108 million pounds for the six months to July 26, hit by weak sales of homewares and customers deserting its Waitrose supermarkets for cheaper rivals.

Britons are cutting back spending amid rising food and fuel costs, as well as sliding house prices.

John Lewis, which is owned by its 69,000 staff, said it had responded by reducing prices and as a result had maintained or grown market share in its various product segments.

The group spent 30 million pounds on promotions and cutting prices at Waitrose, and had also lowered the price of electricals goods at its department stores to remain competitive with rivals such as DSG International DSGI.L.

Cassoni declined to estimate how much the group might invest in the second half of the year.

"We will continue to invest to maintain our position," she said in a telephone interview. "We're responding to what the competition does and, at the moment, the competition is pricing quite aggressively and the question is how long they can maintain that on their bottom line."

NO COMPROMISE ON QUALITY

Waitrose Managing Director Mark Price said the price cuts meant the grocery chain was now on average 10 percent cheaper than upmarket rival Marks and Spencer (MKS.L) and that it was even cheaper than discounter Aldi on some basic items.

Waitrose would become price competitive on all branded goods and would ticket items within store to raise customer awareness of this, he told reporters on a conference call.

But he said Waitrose would not compromise on quality, and would continue to invest in its own ranges of upmarket foods.

Cassoni said John Lewis was interested in expanding its department stores into Ireland, but that it hadn't entered into any binding arrangements. There have been press reports the group might anchor a scheme on Dublin's Upper O'Connell Street.

Waitrose's focus, however, remained within the UK, Cassoni said, adding the group was not looking at Irish supermarket group Superquinn, which has received several expressions of interest from potential bidders.

Price said Waitrose would trial a new convenience store format, but declined to give further details.

Cassoni said John Lewis's expansion plans had not been affected by greater caution among property developers.

"Certainly, the larger developers are continuing with their plans. Potentially there might be some delay in some of the smaller locations but these are long term plays -- seven to 10 years," she said.