‘We got it badly wrong’, David Jones parent company Woolworths Holdings’ boss Ian Moir admits

DAVID Jones’ parent company has admitted it made key errors in the past six months, vowing to fix its mistakes.

David Jones chief executive David Thomas and Jessica Gomes on Boxing Day. Picture: Mark Dadswell

DAVID Jones has unveiled lacklustre half-year results as it struggles to transform the department store into a world class destination.

Parent company Woolworths Holdings, based in South Africa, blamed high levels of discounting, the closure of Dick Smith concessions David Jones stores and a poorly executed private label strategy for a drop in sales growth.

In the 26 weeks to December 25, David Jones’ sales increased by four per cent, compared to an 11.2 jump in the previous corresponding half and an 8.4 per cent increase in the year to June 2016.

Woolworths also said David Jones and Country Road Group’s sales were impacted by the timing of the Boxing Day sale, which falls into the second half of this financial year.

Chief executive Ian Moir cited “challenging trading conditions” in Australia, where a string of fashion labels have gone under in recent months, including Marcs, David Lawrence and Herringbone.

But he admitted the company had failed to properly execute its plan to boost its private label range to 20 per cent of stock, contributing to the disappointing sales.

‘HOW WE GOT IT WRONG’

“Everybody wants to talk to me about private label, everybody wants to tell me how bad it is and what a mistake it was,” Mr Moir told investors.

“The strategy of private label in David Jones is not wrong, it’s right ... A significant number of department stores across the world have significant private label offerings. It allows you to differentiate yourself and maximise your margin.”

Where the team went wrong, he said, was in executing the strategy.

“Our systems didn’t speak to each other, we didn’t know where stock was, it arrived late, and then it arrived in the wrong mix, it just wasn’t good. We spent too much launching brands, the product for which wasn’t there. So, we got it wrong.”

The merchandising teams would press on, he said, but the timeline for reaching their target would be stretched out.

“We’ve slowed the whole thing down, we’ve sorted out the executional issues, the teams have been working together, we’ve got a better understanding ... and we’re getting there,” he said.

He said Boxing Day sales were counted in the second half this year and the first half last year, impacting on the results.

A ‘WORLD CLASS’ DEPARTMENT STORE

Woolworths Holdings has previously announced plans to invest $75 million to $100 million over three years to “transform David Jones into one of the best department stores in the world” and bring it back to profitability by 2019, with net losses of $5 million to $10 million expected in 2017-18.

Key to the strategy is the new store to be built on Sydney’s Elizabeth St, at a cost of up to $200 million, over the next three years.

The existing Market St store has been sold for $360 million, with $170 million to be invested over the coming three years to refurbish and turn it into a “foodie destination”.

It’s here that David Jones has been trialling a new food offering with a selection of prepared salads, precut vegetables, soups and curries.

The company is testing the waters ahead of its plan to offer customers an Australian version of South Africa’s Woolworths stores, where premium groceries and in-store dining are a big part of its business.

In a separate initiative, it has partnered with celebrity chef Neil Perry in a revamped dine-in offering at David Jones food halls.

While acknowledging that “the food business in Australia is very competitive”, Mr Moir said engaging customers in this space would be key to David Jones’ success.

“In the world of the future, retail will have to be really engaging and entertaining; it has to be an experience,” he said.

“So in our food business, we’re not going to be selling tins of beans ... We’ll be selling the best of everything from across the world. It has to be great.”

— With AAP

[e-mail]