David Jones: Department store closures after 3rd year of failing sales

Major department store David Jones has suffered another setback, but the company says a portion of the business is thriving.

Major department store chain David Jones has recorded a third consecutive year of sales contraction, the company announced in a trading update, with little sign the slashing of interest rates has encouraged consumer spending.

The David Jones and Country Road Group, bought by South African retailer Woolworths Holdings in 2014 for $2.2 billion, have laid out plans for store closures and downsizing floorspace to lean on the recent success of its online shopping.

Online sales rose 46.8 per cent and now account for 7.7 per cent of total sales in the 52 weeks to June 24.

David Jones’ like-for-like sales was 0.1 per cent lower, and total sales was down 0.8 per cent.

The Country Road business, which includes Mimco, Witchery, Trenery and Politix, recorded a same-store sales loss of 0.6 per cent as the company reduced floorspace by 2.9 per cent for the division.

“As the contribution from online sales increases, the reduction in unproductive space remains a priority,” the company said in the trading update.

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 in the short-term as the country struggles through a “retail recession”.

“Retail trading conditions in Australia remain challenging,” the company said.

“David Jones was also significantly impacted by sales disruption resulting from the Elizabeth Street store refurbishment, which is on track to be completed by the third quarter of the 2020 financial year.

“In Country Road Group, while sales growth in the second half was also impacted by the trading conditions, online sales in Australasia grew by 12.9 per cent, representing 20.3 per cent of sales.”

Much like the smaller convenience store-style that Woolworths and Coles have been opening, David Jones has focused on smaller floor space in its new stores to modernise the shopping experience.

David Jones opened the first of its miniature department stores in Sydney’s Barangaroo in 2016. Picture: Getty Images

The miniature department store at Sydney’s Barangaroo opened in late 2016 was the first of this fleet, with the South African-owned chain preferencing a layout of 1400 square metres over two floors — one-10th the size of the chain’s average department store.

This model allows both David Jones and Myer to offer a more curated range of products to suit a local demographic rather than trying to meet the needs of a broader market, Queensland University of Technology retail expert Gary Mortimer told news.com.au.

DGC Advisory retail analyst Geoff Dart said earlier this year downsizing and modifying the brands in store to increase profit margins wouldn’t work because younger consumers didn’t see any relevance in the brand.

“Which is why profits have been declining every year for 15 or 16 years. Revenue is not growing and that can only get worse,” he said.

“It’s a brand issue, it’s like Coca-Cola trying to say they’re healthy.”

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