Retail giant John Lewis has said its plans to revive the business are working after its losses over the first half of the year nearly halved.

The partnership – which includes the John Lewis department stores as well as Waitrose supermarkets – reported a loss of £30m, down from a £59m deficit last year.

It said annual profits should be significantly higher than last year, although it warned that the outlook for consumer spending was uncertain.

Sales at its department stores fell in what it called a “challenging market”, but revenues at Waitrose grew.

The retailer has been trying to win back customers after a tough few years that has seen it cut jobs and close several stores.

In March, it reported its first annual profit after years of losses, but also said it would not pay a staff bonus for the second year in a row.

Announcing the latest results, Nish Kankiwala, chief executive of the John Lewis Partnership, said: “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.”

Sales at the John Lewis department stores were down 3% over the first half of the year, with fashion hit by “the well-documented squeeze on customers’ disposable income and unseasonal weather”.

Diana Wehrle, retail analyst at Rendle Intelligence and Insights, said fashion was a “key thing” for John Lewis but they were facing challenges from rival chains. “Marks and Spencer have really upped their game,” she said.

John Lewis said its strategy for boosting the business included the return of its “never knowingly undersold” price pledge, which it announced last week.

It has also agreed a new tie-up with book chain Waterstones, which is set to open in its Oxford Street store in London next month.

Waitrose sales climbed 5% over the half-year, in a period which has seen the first opening of an in-store outlet from Gail’s bakery.

The supermarket chain is also planning to open up to 100 new convenience shops over the next five years.

Ms Wehrle said the tie-ups aimed to drive more people into stores and make them stay longer. However, she added it was “not going to significantly move the dial” on sales.

Waitrose has been the “shining light”, she said, and the new convenience stores made sense as “a lot of their offering is designed in smaller portions”.