2nd UPDATE: UK's John Lewis Sales Flat Over Xmas Season

U.K. department store chain John Lewis Monday reported flat comparable sales over the holiday season as consumers slashed spending on home-related goods amid falling property prices, and cautioned that the next few months will be extremely tough.

Home sales fell 6% over the five weeks to Jan. 3 from the same period a year earlier. Fashion sales, including beauty, rose 4% amid steep discounting, while electricals and home technology sales increased 10%.

Some analysts said the retailer's performance was encouraging given the crisis on the high street that has led to several retailers being placed in administration.

Pali International's Nick Bubb described John Lewis' Christmas sales trading update as "pretty good," adding that the employee-owned chain looks to have done better than most nonfood retailers.

John Lewis' rivals, Debenhams PLC (DEB.LN), Next PLC (NEXT.LN) and Marks & Spencer Group PLC (MKS.LN) in the next two days are expected to report disappointing holiday sales. Marks & Spencer is widely expected to issue another profit warning Wednesday, according to analysts.

Total sales, excluding value added tax, rose 2.4% over the five-week period from a year earlier. John Lewis' burgeoning online business was the star performer over the holiday season, while all its stores performed similarly across the country, Managing Director Andy Street told Dow Jones Newswires.

Street conceded profit margins will be lower than last year as a result of the group's pricing policy of being "never knowingly undersold" as rivals discounted heavily to get shoppers to spend.

However, profit margins haven't been hurt as much as he feared, said Street, adding the impact has been "pretty small." He declined to provide figures.

"I am really encouraged by this performance over the key Christmas and early clearance period," Street said. "It is especially pleasing that our home assortment has begun to see stronger trade in the last week," he added.

Stock levels are below last year, Street said.

John Lewis expects the "next few months to be extremely tough" but is confident of riding out the downturn, he said.

There are 27 John Lewis department stores around the country, which trade under the same name as its parent, John Lewis Partnership PLC. The group also operates 198 up-market supermarket stores under the Waitrose brand.

For the week to Dec. 27, Waitrose sales rose to GBP111.3 million from GBP79.2 million a year earlier. Waitrose hasn't published sales figures for the five-week period to Jan. 3.

The John Lewis Partnership, which is owned by its 69,000 employees, will publish its full-year results March 11.

Earlier Monday, up-market London department store Liberty PLC (LBE.LN) kicked off of the retail Christmas trading season with an encouraging report that said sales for the first 10 months to Dec. 31 were ahead of last year.

While conceding November's trading was hurt by the general retail slowdown, Liberty said "sales in December exceeded expectations and almost matched last year's record Christmas as the store cleared its stocks in preparation for its store renovation in January." Trading was also helped by Liberty's newly launched online business.

Liberty didn't publish sales figures. It will report full-year results in early March.

 
   Company Web site: www.johnlewis.com 
 
   -By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; lilly.vitorovich@dowjones.com

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