UPDATE 1-John Lewis warns cooling consumer demand will hit full-year profits

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LONDON, Sept 14 (Reuters) - British retailer John Lewis said on Thursday its performance in the crucial final months of the year and into 2018 would be hit by softening consumer demand and rising pension costs following a first-half slump in profits.

The employee-owned group, which owns the eponymous department store business and the upmarket Waitrose supermarket chain, said its profit before tax fell by 53.1 percent to 26.9 million pounds ($35.6 million).

Operating profit before exceptional items fell 12.8 percent to 125.4 million pounds.

"We expect the headwinds that have dampened consumer demand and put pressure on margins to continue into next year," said Chairman Charlie Mayfield.

"We will incur higher pension accounting charges in the second half year, as a result of low market interest rates. These will all impact our full year profits."

The firm makes over half of its profits before exceptional items in the final quarter of the year due to surging demand ahead of Christmas.

The firm said in March that investment to deal with rapid changes in the industry, particularly the channel shift from shops to online, would impact short-term profits.

A sharp fall in the value of sterling since last year's Brexit vote, combined with below-inflation pay increases, has also eaten into household budgets in Britain, forcing shoppers to tighten their belts and become more price-conscious.

($1 = 0.7566 pounds) (Reporting by Costas Pitas, Editing by Paul Sandle and Kate Holton)