David Jones blames poor result on devastating bushfires and ‘depressed’ Aussie economy
The department store chain will push ahead with closures as its profit plunges yet again, down more than 50 per cent in six months.
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Beleaguered department store David Jones’ half-year profit tumbled more than 50 per cent, down $27 million, in yet another poor result for the once mighty retailer.
The South African-owned chain blamed the devastating bushfires for reducing foot traffic in its national store network while the recent coronavirus wreaked havoc on its supply chains.
Acting David Jones chief executive Ian Moir said the “sad and difficult” few months in Australia was compounded by the country’s financial struggles.
Delivering Woolworths Holdings’ half-year earnings report from South Africa, he said the Aussie “economy remains depressed”, pointing at poor wage growth, record-low interest rates and weak consumer spending.
“(These are the) toughest conditions I’ve ever seen,” Mr Moir said.
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David Jones’ operating profit fell 57 per cent to $20 million in the 26 weeks to December 29 with competitive retail conditions, low spending and ongoing renovations continuing to weigh on the once glitzy chain.
The company will push ahead with its plans to reduce store footprint and negotiate with landlords to slash 31,000sq m of floor space by 2022. The ongoing closures is part of its previously announced strategy of removing 20 per cent of its physical business by 2025.
“In Australia, consumer spending is likely to be muted in the short-term due to stagnant wage growth and the impact of the bushfires,” the group said in a statement released overnight.
“The heightened levels of competition and promotional activity is expected to continue.
“David Jones is expected to benefit from the completion of the Elizabeth Street store refurbishment.”
Online sales did grow significantly at David Jones, however, up nearly 62 per cent in the half.
This has been an area of strength for the company after a nearly 50 per cent jump in the same period last year and is now responsible for more than 10 per cent of total sales.
Mr Moir handed over the leadership of Woolworths Holdings to his successor Roy Bagattini when handing down the results.
But the executive will continue to oversee David Jones after admitting his $2.1 billion takeover of the diminishing department store was a mistake.
“We overpaid for David Jones and we bought it at the wrong time but we had two great years,” Mr Moir said according to the Australian Financial Review.
“The mistake we made was the amount of transformation we tried to shove down the throat of that business. We disrupted that business to far too great a degree and I have to take responsibility for that, but it doesn’t make it a bad business.”
David Jones is downsizing its Sydney flagship store from two sites spread over 17 floors into one store with 11 floors and a foodie mezzanine, closing its Market Street branching and squeezing into the one Elizabeth Street premises.
Natural light will stream in from huge windows on to an area the company has dubbed “shoe heaven”. Above the shoes, in an area that was once offices for execs, will be a mezzanine with a champagne bar boasting commanding views over Hyde Park.
But this transformation is costing David Jones, which in July recorded a third consecutive year of sales loss.
If you were underpaid by Coles, Target or any other retailer and want to have a chat, get in touch at james.hall1@news.com.au or @James_P_Hall
Originally published as David Jones blames poor result on devastating bushfires and ‘depressed’ Aussie economy