What is going wrong at John Lewis?

What is going wrong, and is it heading in the same direction as former rivals such as House of Fraser?

– Why are profits down?

The owner of the department store chain and supermarket Waitrose posted underlying pre-tax profits of just £1.2 million for the six months to July 28, blaming “challenging times” and the most promotional market for nearly a decade.

It said profits at John Lewis & Partners have continued to be squeezed by strong competition as it moves to keep prices low despite inflation, and has offered “unprecedented” levels of price matching through its Never Knowingly Undersold pledge.

In June, it warned that profits would be close to zero this year because it was investing in its IT systems, believing it must maintain investment levels “whatever the economic environment”.

– What about Waitrose?

The supermarket posted a better performance, remaining in profit albeit down 12.2% at £96.4 million on an underlying basis.

Like-for-like sales rose 2.6% thanks to a marked improvement in the second quarter, with the grocery chain on track for a full-year trading profit.

The group expects profit growth in Waitrose to continue to be offset by the squeeze at John Lewis.

– What about other retailers?

This year has been torrid for high street retailers, with department stores showing some of the most significant signs of financial distress.

House of Fraser collapsed into administration last month and Debenhams has issued a string of profit warnings.

Sir Charlie Mayfield, chairman of the John Lewis Partnership, has said John Lewis was making decisions that would allow it to be sustainable in the long term.

In June the partnership said it would invest more in developing “unique” products and services, as well as placing more emphasis on its own brand.

To strengthen the company’s balance sheet, the board is looking to save around £500 million over the next three years.

 – Hasn’t the partnership just rebranded, and paid Sir Elton John £5m to star in its Christmas ad?

The partnership has not disclosed the costs of its recent rebranding that added “& Partners” to John Lewis and Waitrose, to put its 83,000 staff, known internally as partners, “at the heart” of the business.

It has also refused to confirm a report by the Mail on Sunday that it has paid Sir Elton £5 million to appear in its Christmas ad, saying it would “never comment” in advance of its highly anticipated festive campaign.