John Lewis, Britain’s biggest department store chain, said it expected the food retail business to remain challenging for some time as it reported a drop in underlying first-half profit at its up-market Waitrose grocery chain.

Waitrose, which accounts for about two thirds of the group’s sales, increased its grocery market share to five per cent, but its operating profit before exceptional items fell 9.4 per cent to £145.2 million.

Waitrose had warned last month that investment in store openings, refurbishments and in online capacity, as well as in price cuts and promotions, required to allow it to compete in a tough UK grocery market, would affect profits this year.

Food retailers in Britain are facing tough times as the pace of market growth slows and as consumers seek cut-price deals, buy less and often shop at local convenience stores or online.

The John Lewis department store business grew operating profit before exceptional items by 62.2 per cent to £56.3 million. On a group basis, first-half operating profit before exceptional items rose 8.6 per cent to £176.1 million helped by the profit bounce at the department stores.