The John Lewis Partnership reported its first profit fall in six years yesterday after suffering from the collapse in consumer confidence and a slowdown in sales of homewares and furniture.

The privately owned group said that pre-tax profits across its department stores and the Waitrose supermarket chain plunged by nearly 27 per cent to £107.3 million over the six months to July 26.

Charlie Mayfield, the chairman, said that the economic climate had become progressively more difficult and that there was little sign of an upturn next year.

Operating profits at the John Lewis department stores fell by 34.4 per cent to £21 million as sales of homewares dropped by 5percent. Operating profits at Waitrose dropped by 8.4per cent to £102.7 million.

Mr Mayfield said that as well as a 5 per cent fall in homewares and furniture sales, profits across the partnership had been hit by higher pension costs and liabilities and an increased level of price promotions to honour its “never knowingly undersold” motto.

He added that the group had made a conscious decision to pursue its long-term growth plans rather than worry about trying to ensure that profits came in higher than a year ago. The group opened its latest department store in Leicester this month.

Mr Mayfield said: “We could cut investment, but it is my very strong feeling that it would be totally wrong. The great advantage we have is that we are not beholden to the City.

“We don't have any executives with great big bonuses riding on the fact that they are going to get a higher level of earnings per share. We want to achieve long-term growth for the partnership.”

He insisted that despite the lower profits, the John Lewis department stores were outperforming the market on fashion and electricals and technology. Total sales across the partnership rose by 3.6 per cent to £3.3 billion.

The fall in profits is likely to mean a far lower bonus for the partnership's 69,000 staff next year. This year they were awarded 20 per cent of their salary as a bonus in recognition of record profits at the group.

Mr Mayfield wants to double the size of both John Lewis and Waitrose over the next nine years through new stores in the UK and overseas and the expansion of their internet business.

Waitrose will open its first store in the United Arab Emirates this year and trial a convenience concept that is likely to mimic the Simply Food format that has worked well for Marks & Spencer in recent years.

Mr Mayfield suggested that some of the fears about the credit crunch on the high street were excessive. He said: “The market has been very challenging, you have to say that. But I do think that some of it is overstated. Clearly, there has been a huge impact on a lot of people.”

He added: “After the initial shock of the credit crunch last summer, the economic climate has become progressively more difficult, consumer confidence has hit a record low and the retail market has slowed markedly.

“It's going to be very challenging for the rest of the year but, while it's hard to see when things will get better, it may not get a lot worse.

“I was at our new store in Liverpool the other day and it was great. It didn't feel to me like the market was facing a recession.”

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