John Lewis is worried and given the state of the retail market it's right to be

The partnership is selling more products but making less money as it promises to pay its partners more. But it's alive to the danger in a market full of surprises as Morrisons' turnaround amply demonstrates

John Lewis has not been immune from the tumult taking place in retail (Streetview)

In many ways the John Lewis Partnership is very fortunate. While it regularly releases its numbers to the market it doesn’t have to be a slave to the quarterly sales figures.

The business doesn’t have shares that the City will bite at if it hits a bump in the road. Its bosses don’t have to worry about calls from skittish shareholders if it undershoots analysts’ forecasts.

On the other hand, the retail business is changing at a rapid speed and responding to that requires rapid action. John Lewis is not immune to that.

The partnership’s latest set of results make that very clear. It is selling more, at the headline level, and at stores open at least a year (which excludes new openings) at John Lewis outlets.

Waitrose is down a bit by that measure but it’s worth noting that others are suffering a lot more in the face of food price deflation and a brutally competitive marketplace.

However, that marketplace, and the pressure on retailers operating within it to keep prices low, means it is making less money on what it sells. So while gross sales were up 3.1 per cent during the six months to 30 July, and overall revenues were up 2.7 per cent, operating profit fell by 58.3 per cent, which is a gut punch by anyone’s standards.

This was not a consequence of the EU referendum result, which chairman Sir Charlie Mayfield says has had little quantifiable impact on sales so far. "Instead there are far reaching changes taking place in society, in retail and in the workplace that have much greater implications." If that makes him sound worried, he's right to be.

John Lewis has for been growing its market share for quite some time. People like its shareholder free model. They see its brand as aspirational. It's the place to go if you want to be seen as solidly middle class or a bit better.

The company also sets great store by the service it offers, and it sometimes even lives up to its claims. It is, nonetheless, still a savvy retailer, one that is clever enough to offer things like free two-year guarantees on electrical products that don’t cost the business much given how reliable those products are these days. That sort of thing still helps to draw in the punters.

But it isn’t immune from the tumult in retail. Is the two-year guarantee worth the extra I might have to pay to shop for item X at John Lewis? That’s the question I expect a lot of people ask themselves. To stem the flow of shoppers saying “no it isn’t” John Lewis has to keep its prices keen.

At the same time, however, it is raising wages, and not just by the amount the Government is demanding through Its National Living Wage. That would impose £3m in extra costs, whereas the raises the Partnership is handing the lowest paid partners will cost more than £30m.

It isn’t hard to spot the squeeze and it's no wonder John Lewis is making less money. In future, as Sir Charlie makes clear, it will have to employ fewer people and demand more from those it does employ.

“Our strategy for shops continues to be anchored in convenience and experience – giving our customers a reason to visit shops and inspiring them when they are there,” he says. “Our ownership structure makes it especially important that we manage the Partnership carefully and thoughtfully for the long term and our plans anticipate the impact of these bigger changes. Evidence of that is already showing within these results and will become increasingly evident as we implement our long-term strategy.”

Retail is full of surprises. There were many (including me) who questioned whether Waitrose rival Morrisons would survive not so long back. When it took on a bunch of ex-Tesco people to lead a turnaround those questions grew louder, given the state the latter had got itself into. And yet on the same day as the John Lewis numbers, Morrisons reported rising profits and a 2 per cent increase in sales at stores open at least a year, which puts Waitrose to shame. New boss David Potts has cut prices and costs, while managing to improve service. He's overseeing a surprising self-help turnaround.

When compared to the state Morrisons was in when Mr Potts got his hands on it, John Lewis doesn’t have much to worry about. But the way retail is right now, not worrying can be fatal.

The fact that John Lewis, with its unique ownership model and its many sensible policies (such as limiting the multiple executives get paid over workers), is still around and thriving is good for retail. It’s good for British business. So the fact that Sir Charlie and his team appear to be worried is actually to be welcomed.