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Fashion Sales Up at John Lewis but Uncertainty Abounds

Britain’s vote to break up with the European Union had little impact on first-half sales at John Lewis and Next, but uncertain times make for a hazy outlook.

John Lewis Partnership said Thursday that like-for-like sales at its namesake department store chain rose 3.1% in the six months ended July 30 and gross sales increased 4.5% to 2.02 billion pounds ($2.64 billion). Fashion sales were up 2.8%, thanks to a 4 percent increase in womenswear and a 4.9% jump in menswear.

Despite growing sales overall, operating profit plummeted 31.2% to 32.4 million pounds ($44.75 million). The company attributed more than half of this decline to transitioning costs in its distribution network and higher staff pay, as well as e-commerce (online sales represented 34.5% of total merchandise sales in the first half) and a market dynamic of competitive pricing.

“Our commitment to competitive pricing, excellent service, increasing pay and investing for the long term have held back profits,” the retailer said in a press release, adding that trading pressures are expected to continue through this year and next. “The EU referendum result has had little quantifiable impact on sales in the first half, but the uncertainty of leaving the EU will remain and the full impact of this change is yet to become clear.”

Similarly, high street clothing chain Next reiterated its expectation that costing rates will be around 9 percent worse next year than in 2016/17, while cost prices will rise by as much as 5 percent on like-for-like products, because of Brexit.

The retailer said Thursday that while Next Brand sales were 3 percent ahead of last year in the six months ended July 30 to reach 1.9 billion pounds ($2.5 billion), full-price sales declined 0.3% on a comparable week basis. Directory sales rose 7.1%, mainly as a result of improved stock availability, enhanced website functionality and continued growth from its Label brands business and overseas.

That being said, pre-tax profits were down 1.5% and net profit fell from 277 million pounds ($362.5 million) to 273.5 million pounds ($357.9 million).