The partnership that owns John Lewis and Waitrose suffered a near 20 per cent drop in profits, but put the falls down to "investment in future growth plans" and the commitment to never being undersold.
Charlie Mayfield, the chairman of John Lewis Partnership (JLP), said the group had made "good progress" in the first half despite the 18 per cent decline in profits to £90.4m.
He added that John Lewis and Waitrose had grown ahead of their markets with sales up 6 per cent to £4bn for the six months to the end of July: "We are very happy with the sales performance." He added that the bulk of the returns – close to 80 per cent of full-year profits – would come in the second half.
"The partnership has always had a long-term outlook, and our business is stronger today because of it," he said. The company's capital expenditure jumped by £99m to £254m. "It's about investing in the future," he said. "We've taken a deliberate approach in a difficult market."
The company carried out a similar strategy in the first half of 2009, leading to profits halving. "It took some courage and a deep breath," Mr Mayfield said, "and the second half was much better. In 2010 profits were up 20 per cent".
The company believes trading conditions will remain tough into next year. "We are not simply waiting for the recovery, but instead have increased the pace of investment and innovation across the partnership," Mr Mayfield explained. The profits also came under pressure from tougher price competition as its rivals discounted and testing its "never knowingly undersold" commitment. That was applied to the online prices of its "bricks and mortar" competitors.
John Lewis sales rose 1 per cent to £1.4bn, while profits fell by more than half to £15.8m. The most growth was seen in fashion, which rose 4.2 per cent, followed by its electricals and home technology operation, which rose 3.8 per cent. It pointed to growth in the online operation, which now makes up 19 per cent of sales.
"Our expectation is that johnlewis.com will be achieving sales of £1bn by 2014," Mr Mayfield added. The group opened its latest John Lewis store in the Westfield shopping centre in Stratford on Tuesday. Mr Mayfield said the first day was "amazing".
Waitrose profits fell 14 per cent to £110.2m despite an almost 9 per cent rise in sales. The supermarket chain's numbers also fell following investment in its stores and improved service, as well as cutting prices.
It opened 16 stores in the first half, with eight in the convenience format. The company is planning to open 12 more shops in the second half.
Mr Mayfield said: "There are huge changes taking place in the way people shop as a result of technology reaching every part of our lives. To succeed you must have better shops that are destinations people want to get to and supply chains that deliver it when they want."