January 11, 2018 / 8:17 AM / in a year

UPDATE 1-Retailer John Lewis says Christmas sales rise but margin pressure builds

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LONDON, Jan 11 (Reuters) - British retailer John Lewis warned that trading was likely to remain volatile in 2018 after higher costs and tough competition blunted the benefits of solid Christmas sales.

John Lewis Partnership, which runs John Lewis department stores and supermarket chain Waitrose, said on Thursday gross sales rose 2.5 percent to 1.96 billion pounds ($2.64 billion) in the six weeks to December 30 compared with the same period in 2016.

But downward pressure on margins continued as the retailer chose to keep prices competitive, even while costs were higher due to a fall in the value of sterling.

“Looking ahead to 2018/19 we expect trading to be volatile due to the economic environment and anticipate that competitive intensity will continue, driven by the structural changes taking place in the retail industry,” said Charlie Mayfield, chairman of John Lewis Partnership, in a statement.

The retailer said that its department stores outperformed the market despite the difficult promotional environment.

John Lewis saw its busiest ever Black Friday sales — a growing phenomenon in Britain — but that price competition over the period was also rising.

“The level of discounting in the market was pretty unprecedented,” Mayfield said on BBC radio.

Department stores also saw record demand in the lead-up to Christmas.

For the six-week period as a whole, fashion and electrical and home technology sales rose around 5 percent, but sales in its home departments dipped 0.3 percent as customers were cautious about bigger purchases.

Waitrose’s like-for-like sales rose 1.5 percent over the period, and were up 2.2 percent when New Year’s Eve, which this year fell outside of the Christmas period, was included.

Gross sales from the department store business were 1.034 billion pounds in the period, while Waitrose contributed 928 million. ($1 = 0.7414 pounds) (Reporting by Alistair Smout; editing by Costas Pitas/Keith Weir)

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