John Lewis Partnership slashed its losses by nearly half in the first six months of this year as its Waitrose chain of supermarkets continued to increase customer numbers.

The recovery within the group's supermarkets offset falling sales across the John Lewis chain of department stores that have been under pressure from the rising cost of living. Chief executive Nish Kankiwala declared that "the buzz is back" as the group predicted "significantly higher" profits for the full year, but refused to be drawn on whether staff might receive their renowned annual bonus in March.

The mutual's employees, known as partners, last received the annual award in 2022. Independent analysts Nick Bubb said the partnership could make an annual profit of £125 million, up from £42m last year, but the group has previously declared that it will not pay a bonus unless profits hit £150m.

A "challenging market" meant total sales at John Lewis were down 3% to £2 billion during the six months to July 27, but Waitrose attracted more customers leading to a 5% uplift in sales to £3.9bn. The combined effect was a 2% increase in revenues as the group pre-tax loss fell from £59m a year earlier to £30m.

Garry White, chief investment commentator at wealth manager Charles Stanley, said the decision to ease off on the push to derive earnings from outside retail has been a boost to the partnership.

"The John Lewis Partnership has refocused on retail – and the strategy is paying off," Mr White said. "Last year the company scrapped its target of generating more than 40% of profit from non-retail operations, scrapping plans to build and rent out homes due to high interest rates."

That has been a plank in the strategy of departing chair Sharon White, who will be succeeded on Monday by Tesco veteran Jason Tarry after five years in charge. Her contract officially runs until February next year but the group has confirmed she will continue as an advisor to Mr Tarry until the end of December.

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First-half profits were boosted by £78m of savings which included investment in technology to improve the availability of goods and cut waste at Waitrose. The supermarket chain has also reduced employee hours by matching staffing levels most closely with the ebb and flow of customers.

"These results confirm that our transformation plan is working and we expect profits to grow significantly for the full year, a marked improvement from where we were two years ago," Mr Kankiwala said.

"We continue to invest heavily in quality, service and value, and customers are responding well - with more people shopping with us and customer satisfaction increasing. While we have much more to do, we're well set up for a positive peak trading period."