John Lewis Partnership is facing a period of squeezed profits amid challenging trading conditions, according to chairman Jason Tarry. The employee-owned retail group, which also operates the Waitrose supermarket chain, is contending with lower sales and rising costs, prompting a strategic shift in its operations.

In remarks made to staff and viewed by the company’s house magazine, Tarry acknowledged that the current retail environment differs significantly from what was anticipated even six months ago. He emphasized the need for the group to adjust its plans to address these immediate challenges, highlighting a focus on margin improvement and tighter stock management rather than solely pursuing sales growth.

John Lewis, with its network of 34 department stores, is in the midst of a turnaround effort led by Tarry and executive director Peter Ruis. The group is concentrating on expanding faster-growing sectors such as beauty, fragrance, and hospitality to revitalize its product offering and attract customers amid increased competition from discount retailers and online platforms. Department store footfall has generally been weak, contributing to the company’s pressure.

The retailer’s efforts to reduce costs, including store closures and reductions in employee bonuses, have met with dissatisfaction from both staff and customers. Despite these measures, the group awarded a 2 percent bonus to its 66,000 employees this year—the first payout in four years—though this remains far lower than the 24 percent bonuses common in the 1980s.

Financially, the John Lewis Partnership reported a profit before tax and exceptional items of £134 million for the year ending January, slightly up from £126 million the prior year. However, the company recorded a statutory pre-tax loss of £21 million, compared with a £97 million profit the previous year, due to one-off expenses including a writedown of obsolete technology assets.

Sales across the partnership grew by 5 percent to £13.4 billion. Most of this growth was driven by Waitrose, which increased sales by 7 percent to £8.5 billion. Meanwhile, the John Lewis department store division posted a more modest 3 percent rise in sales, reaching £4.9 billion.

When asked about the timeline for the turnaround’s completion, Tarry expressed that it is an ongoing process, stating, “it will never end.” The company continues to navigate a difficult retail landscape with a focus on sustainable profitability and adapting to evolving consumer behaviors.