Operating profit at the group was 8.6% down to £393.3m in the year to 28 January. Sales across the group, however, increased 6.4% to £8.73bn.
Profit at the John Lewis department store chain fell 20.4% to £157.9m. The retailer has previously warned that its Never Knowingly Undersold price matching commitment will hit margins.
The chain posted a 3% increase in total sales to £3.33bn and a 1.3% rise in sales at stores open for more than a year, thanks in part to celebrated advertising campaigns like its Christmas TV ad.
Online sales increased 26.3% to £680.8m and account for one fifth of all sales.
At Waitrose, like-for-like sales increased 3.6% and total sales rose 8.6% to £5.40bn during the year. Profit at the grocery chain fell 5.2% to £260.6m.
During the year, John Lewis says it invested £21.3m in improving operating structures shared by Waitrose and John Lewis, that it says will improve efficiency in the future. It also invested £381m in benefits for staff.
The group says its investment into new own label ranges such as Waitrose Essentials and Love Life in the past three years helped boost sales, as did its increase in promotional activity and brand match promise. Own label products now account for 54% of Waitrose sales.
Charlie Mayfield, chairman of the John Lewis Partnership, concedes that profit was “lower than expected” but outlined the group’s commitment to multi-channel customers that shop across stores, online and mobile, to ensure the businesses future success.
He says: “Profound changes are taking place in the retail sector and importantly this was a year when we upped the pace of innovation and investment. That came at the price of some short-term profit but leaves us in a good place at the start of this year.
“Our priority is to serve the multi-channel customer better than anyone else – it’s on that, and on innovation, that success in the future depends.
Mayfield also said that the Partnership plans to increase the number of exclusive products only sold at Waitrose and John Lewis stores
All staff at the group received a bonus equivalent to 14% of their salary – the first fall in three years. Last year the bonus reached 18%.