The John Lewis Partnership has warned its annual staff bonus is at risk this year after it slumped to a first half loss of £99m and said the outlook in the run-up to Christmas was “uniquely uncertain”.

The group, which is staff-owned and includes the Waitrose supermarket chain, blamed soaring inflation, saying it had taken a hit to profits on items like school uniforms in order to shield customers from the worst of the price rises.

“A successful Christmas is key for the business given the first half,” said John Lewis group chair, Sharon White. “We will need a substantial strengthening of performance, beyond what we usually achieve in the second half, to generate sufficient profit to share a partnership bonus with partners. Much will depend on the wider economic outlook and consumer sentiment.”

John Lewis group paid a 3% bonus to workers for last year, after scrapping the payment for the first time in 67 years in 2020, when it made a £517m loss.

The warning came as other retailers reported downturns. Furniture store DFS, which also updated the market on Thursday, said order numbers had “softened markedly” due to cost-conscious consumers cutting spending. The company increased revenues by 8.5% to £1.1bn for the year to 26 June, but pre-tax profits fell by 43% to £58.5m.

Shares in THG, formerly known as The Hut Group, slumped by more than 14% after the online beaty and health retailer cut its full year sales and profit forecasts due to a slowdown in consumer demand.

The Manchester-based company expects adjusted core earnings of £100m to £130m this year, down from the £161m THG made last year and forecast to match in previous guidance.

“No one could have predicted the scale of the cost of living crisis that has materialised, with energy prices and inflation rising ahead of anyone’s expectations,” said White. “As a business, we have faced unprecedented cost inflation across grocery and general merchandise.”

The group warned the outlook was “uniquely uncertain” owing to the cost of living crisis and its impact on discretionary spending, particularly on its key Christmas trading period.

White said the business, which is “heavily skewed” toward the so-called golden final quarter, would need to substantially outperform in the second half of its financial year for staff to receive an annual bonus.

The group said the first half loss, for the 26 weeks to 30 July, was down to two trends.

While there was an uplift in the number of customers year on year – up 6% at Waitrose and 4% at John Lewis – consumers chose to spend less due to high inflation while costs have dramatically increased. It said it had not passed on its own rising costs to customers. For example, it froze or reduced prices on more than 95% of school uniform items, “conscious that these are an essential item”.

The group, which said it was investing £500m in keeping price rises down this financial year, also announced measures to help staff cope with the cost of living crisis.

Partners would receive a one-off cost of living support payment of £500 for full-time workers, pro-rata for part-time ones. Entry-level partners would also receive a 4% pay rise, which will cost the business £10m in the second half of this financial year.

A wider post-pandemic trend has seen customers choosing to move their discretionary spending away from “high margin, big ticket household items to restaurants and holidays – from dining room furniture to dining out”, the group said.

The cost of living crisis fuelled a 28% increase in sales of its value brand, Anyday, which offers items at a discount of about a fifth compared to its own-brand products. And energy-saving items proved a hit with consumers, with sales of air fryers up 56% and smart thermostats up 8%.

Fashion has proved to be the strongest performing category, with sales up a quarter year on year, as consumers bought holiday wear.

Waitrose sales fell by 5% year on year to £3.6bn as operating profit fell by more than £90m to £432m.

However, shares in DIY firm Wickes surged more than 10% after the company reported record revenues of £822m in the half year to 2 July, as shoppers looked to insulate their homes to mitigate soaring energy bills.

Investors were buoyed as the company re-affirmed its guidance on hitting adjusted pre-tax profits of £72m to £82m, despite again saying that the pandemic-fuelled DIY boom has significantly slowed down.