What: John Lewis warns that lower sales and higher costs are putting pressure on profits as it continues its retail turnaround.

Why it is important: John Lewis’s situation shows how cost inflation and weaker consumer demand are testing retail turnaround strategies, even for brands with strong customer loyalty.

John Lewis Partnership chair Jason Tarry has warned staff that the retailer is facing a tougher-than-expected trading environment, with lower sales and higher costs putting pressure on profits. He said the business must adjust to conditions that were not anticipated even six months ago, although a person close to the company said no major strategic changes are planned.

The partnership, which owns John Lewis and Waitrose, had already taken a cautious outlook for the year. It reported a pre-tax loss of £21mn for the year to January, compared with a £97mn profit a year earlier, while liquidity rose to £1.6bn. Waitrose sales increased 7% to £8.5bn, and John Lewis sales rose 3% to £4.9bn.

Tarry, who previously led Tesco’s UK business, has refocused the group on core retail, scrapping a rental homes project and investing cash back into stores. He said the company is prioritising margin improvement and stock control rather than chasing sales, while continuing to refurbish stores and develop new propositions in beauty, sports, and hospitality.

IADS Notes: John Lewis’s latest warning builds on a year of  coverage showing the retailer balancing transformation with intensifying cost pressure. In September 2025, Drapers reported that higher regulatory and employment costs were already weighing on profitability despite stronger sales and customer satisfaction, while Retail Week highlighted the company’s decision to maintain investment in stores, digital infrastructure, and customer experience despite deeper losses. The current emphasis on margin discipline and stock control also aligns with John Lewis’s broader transformation agenda, including its March 2026 investment in AI, TikTok Shop, rapid delivery, and omnichannel discovery. Its June 2026 store transformation programme further underlined the strategic importance of experiential retail, hospitality, and upgraded beauty and regional flagships. Together with November 2025 coverage of John Lewis shifting from closures toward potential growth and a stronger fashion offer, the article shows how the retailer is trying to defend the department-store model while adapting to weaker demand, higher costs, and technology-led competition.

John Lewis chair warns of profit squeeze as trading conditions worsen