David Jones’ sales down 9pc but online business booming

Prolonged lockdowns in Sydney and Melbourne had a major impact on David Jones, hitting sales figures for the first half of the financial year.

People gather outside David Jones in Melbourne’s Bourke Street Mall as restrictions eased at the end of last October. Picture: Mark Stewart

The South African owner of major department store David Jones has reported a 9 per cent fall in sales in Australia in the first half of the financial year, and says prolonged lockdowns in Melbourne and Sydney had a major impact on stores.

“Trade was significantly impacted by government-enforced restrictions across the region, where we were unable to trade in stores representing 70 per cent of our brick-and-mortar sales base during the lockdown period,” the company, Woolworths Holdings, told the Johannesburg Stock Exchange on Thursday.

“The easing of restrictions and reopening of stores, coupled with pent-up consumer demand, delivered positive sales growth in the last six weeks of the period, notwithstanding the shift of Boxing Day sales into the second half of this financial year versus the first half of the prior period.”

While sales at David Jones fell sharply for the period, they rose by 3.2 per cent in the six weeks to December 31. Online sales, the company said, rose 44.2 per cent over the six-month period and contributed 28.1 per cent of the total.

Woolworths also owns Country Road Group – with a portfolio including Witchery, Mimco, Trenery and Politix. Sales in that part of the business declined 3.2 per cent overall but rose 1.7 per cent in the final six weeks of the period.

“Given the prolonged lockdowns in Australia and, to a lesser degree, the disruptions in South Africa, our results for the current period have been negatively impacted by the lost sales, coupled with the absence of JobKeeper and rent relief which supported the prior-year base,” the company’s statement reads. “In addition, the results of the prior period included the profit on the sale of the Bourke Street Men’s property, as well as lease exit and modification gains.”

The department store only returned to profit after three years of losses last year when accounts lodged for holding company Osiris showed a net profit of $83.45m for the year ending June 30.

While sales at David Jones fell sharply for the period, they rose by 3.2 per cent in the six weeks to December 31. Picture: Jerad Williams

Osiris had reported losses of $125.9m in 2020, $489.2m in 2019 and $785m in 2018 – capping a difficult period for Woolworths, which purchased the chain for $2.1bn in 2014.

Much of those losses flowed from huge hits to the value of David Jones assets, including a $712.5m impairment charge to its carrying value in 2018.

In 2021, David Jones received gross government grants under the JobKeeper and New Zealand wage subsidies scheme of $70.94m, against just $32.048m the year before. It paid out the subsidies to its team and didn’t retrench employees during the pandemic shutdowns.

The company also sold its Elizabeth St Sydney CBD building for $510m, producing a gain on the sale of $19m, and a building in Bourke St, Melbourne CBD, for $121m, with a gain on the sale of $23.8m.

“In line with our space reduction strategy, trading space reduced by a further 5.8 per cent relative to the prior period,” Woolworths said in its statement released on Thursday.

Equities analysts are warning of a string of potential unfavourable investment updates for the retail sector as companies begin reporting first-half results.

But poor bricks-and-mortar sales are being balanced by a rise in online shopping at some of the country’s largest retailers.

JB Hi-Fi, which reported its first-half sales earlier this week, recorded a 62.6 per cent increase in online sales – now making up 22.7 per cent of the total.

That result led Citi analysts to upgrade expectations for its rival Harvey Norman. They now expect earnings to increase by 9 per cent for the financial year. Harvey Norman is benefiting from a boom in home renovation.

Originally published as David Jones’ sales down 9pc but online business booming