David Jones feels heat as coronavirus sparks fall in foot traffic
David Jones has warned the coronavirus outbreak is weighing on tourism, along with foot traffic and turnover at the department chain’s stores.
Business
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David Jones has joined the roll call of companies warning they are being hurt by the coronavirus outbreak, saying sales have taken a hit as customer numbers fall.
The parent company of the Melbourne-based department store chain says the outbreak is weighing on tourism, along with foot traffic and turnover at David Jones stores.
It has also warned it is expecting supplies of products from China to be affected.
In a statement to investors late on Thursday, David Jones’ South African parent company, Woolworths Holdings, signalled that it was looking to other suppliers to plug potential gaps.
“The coronavirus is significantly impacting tourism, footfall and sales in Australia,” it said.
“A further impact on sourcing is also expected across the group. The group is currently actively considering ways to mitigate the risks associated with the coronavirus.”
Woolworths also owns the Country Road Group of business, which include the Country Road, Witchery, Mimco, Trenery and Politix brands.
Its warning comes after Vicinity Centres cautioned investors this week that there had been a “material decline” in foot traffic at some of its shopping centres, particularly those popular with international visitors.
Vicinity owns scores of shopping centres nationally, along with half stakes in Chadstone and Emporium Melbourne.
Woolworths also said on Thursday that “consumer spending is likely to be muted in the short-term due to stagnant wage growth and the impact of the bushfires”.
Flagging more sales with heavy discounts, it said “heightened levels of competition and promotional activity is expected to continue”.
It issued the warnings as it reported first-half results, covering the 26 weeks to December 29.
At David Jones, first-half operating profit slumped more than 50 per cent compared with the same period a year ago, from $47 million to a slender $20 million.
In a more positive development, the group said David Jones should benefit from the refurbishment of its store at Elizabeth St, in Sydney, with trade “normalising” next quarter.
Next financial year, David Jones will also cease paying rent at nearby Market St after vacating the building it sold in 2016.
In Melbourne, it is in the process of selling its menswear store on the south side of Bourke Street Mall. It will vacate the store, consolidating its CBD operations on the north side of the mall.
The company said online sales at David Jones surged more than 60 per cent the past six months and now account for about $1 in every $10 of turnover across the business.
At the Country Road Group, operating profit fell more modestly than at David Jones, down 8.2 per cent to $56 million.