British department stores and supermarkets group John Lewis posted a 27 per cent drop in first-half profit and said it was cautious about the outlook for the rest of this year and 2009. On the other hand Wm Morrison Supermarkets Plc met forecasts with a 19 per cent rise in first-half profit and said it was well placed to continue taking market share as cash-strapped Britons flock to its budget-focused stores.

The employee-owned John Lewis group, viewed as a bellwether for Britain's retail industry, said it made a pre-tax profit of £108 million in the six months to July 26 on a 3.6 per cent rise in sales to £3.27 billion.

Operating profit at its department stores fell 34 per cent to £40 million as sales of homewares were hit by a slump in Britain's housing market. Operating profit at its upmarket Waitrose supermarkets fell eight per cent to £103 million.

Many of Britain's store groups are struggling as indebted shoppers curb spending amid rising fuel and food costs, as well as sliding house prices.

"Conditions for the rest of the year will continue to be challenging with ongoing pressures on consumer spend... We remain cautious about the outlook for the rest of this year and the next," John Lewis said in a statement.

The 144-year-old company is owned by its 69,000 workers and runs 27 department stores and 192 Waitrose supermarkets.

Morrison Supermarkets, Britain's fourth-biggest food retailer, which runs about 375 stores and has a market share of about 11 per cent, said yesterday it made profit before tax and one-off items of £295 million in the 26 weeks to August 3.

Forecasts ranged from £284 million to 305 million, with an average of £294 million, in a Reuters poll of eight analysts. Sales excluding fuel at stores open more than a year - a key industry measure - were up 7.6 percent and Morrison said it had attracted an extra half a million customers every week.

"The first half profit performance gives us confidence that we will deliver our profit expectations for the year," it said in a statement.

Asda, Britain's second-biggest grocer and part of Wal-Mart Stores Inc., said last month like-for-like sales excluding fuel and adjusted for the timing of Easter rose six per cent in the three months to June 30.

Market leader Tesco Plc publishes second-quarter numbers on September 30 and number three J Sainsbury Plc on October 8.