Charlie Mayfield, chairman of the John Lewis Partnership, forecast some relief for struggling retailers and consumers next year, as the employee-owned store group saw its first-half profit fall by almost a fifth after a step-up in investment.

However, he predicted that this year would remain difficult. “The rest of this year will continue to be pretty subdued. Following that, in the first half of next year, we will begin to see some slight improvement,” he said.

He expected the relief to come with the anniversary this January of the increase in VAT from 17.5 per cent to 20 per cent. He was also hopeful of more clarity over both government steps to reduce its borrowing burden, and the crisis in the Eurozone, as well as an easing of inflationary pressures.

“One would hope that in three to six months maybe there will be a bit more clarity on some of these points. The rest of the year is more of the same,” he said, adding that he continued to believe there would be “a longer period of slower growth”.

He forecast that the market in the run up to the crucial Christmas period would be “flattish, but I think we will do better than the market”.

While there was some hope of an improvement in conditions next year, Mr Mayfield said the John Lewis Partnership was continuing to invest, and it was this that had reduced first-half profits.

“We are not waiting for that recovery. It would be completely wrong,” he said. “We have got to create our own luck and demand.”

The grocer and department store operator on Wednesday posted a pre-tax profit of £90.4m for the six months to July 30, down from £110.5m for the same period of 2010, in spite of a 5 per cent increase in sales, which rose from £3.43bn to £3.62bn excluding sales tax. It invested £253.8m, some £99m more than last year.

Mr Mayfield said investment in the first half, including in new stores and distribution, had dented profit by £20m. A 3.6 per cent decline in sales from John Lewis stores open at least a year hit profits by £17m, while John Lewis’s promise to never be beaten on price cost it £9m as it was forced to match promotions. This was offset by an increase in profit from areas including its online operation.

Waitrose’s first-half operating profit fell 14 per cent to £110.2m, after £26m of investment. Operating profit at John Lewis department stores more than halved to £15.8m.

Mr Mayfield said he was confident the partnership would pay a bonus to staff, but it was too early to say what this would be.

There were encouraging signs on recent trading, with like-for-like sales at John Lewis, including online, improving from 1 per cent growth in the first half to 2 per cent in the first six weeks of the second half.

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