(Corrects dateline to read '17' instead of '16')
* First-half pretax profit 86.3 mln stg vs 107.3 mln stg
* Expects trading to continue to be difficult
* To invest 189 million stg in H2 after 278 mln stg in H1 (Adds further details)
By James Davey
LONDON, Sept 17 (Reuters) - John Lewis, the employee-owned group seen as a barometer of British retailing, posted a 20 percent fall in first-half profit and said although its second-half had started well it expected a tough 2010. "We expect trading conditions for the remainder of 2009, and into 2010, to continue to be difficult," said Chairman Charlie Mayfield on Thursday echoing comments from fashion retail Next on Wednesday.
He forecast "a slow, drawn-out economic recovery".
But despite this economic backdrop he said the 145-year-old group, which trades from 27 department stores and 214 Waitrose supermarkets and has a permanent staff of 69,000, would continue its aggressive investment programme.
Having spent 278 million pounds ($460.2 million) in the first-half it plans to invest 189 million pounds in the second in existing and new shops and formats and in developing its multi-channel offer.
John Lewis said it made a profit before tax of 86.3 million pounds for the six months to Aug. 1, down from 107.3 million pounds last year, as it continued to cut prices to defend its market share.
The firm's department stores pursued their "never knowingly undersold" price matching policy and saw operating profit halve to 20.9 million pounds, but Waitrose's operating profit increased 15.7 percent to 121.1 million pounds, buoyed by the success of its lower priced "essential" ranges introduced in March.
The firm, which publishes weekly sales figures, said first-half sales increased 3.5 percent to 3.39 billion pounds. After six weeks of the second half, group sales were up 6.2 percent on last year, with Waitrose sales up 11.3 percent and department stores sales down 1.3 percent.
Separately on Thursday, home improvement retailer Kingfisher , owner of B&Q in the UK, reported a 35 percent rise in first-half profit, but said it was planning for difficult trading conditions ahead. (Editing by Mark Potter and Rupert Winchester)