David Jones hits rocky trading conditions, sales fall

David Jones’ sales have seen some of the worst conditions since its acquisition by South Africa’s Woolworths.

David Jones was hit by a number of factors that sent its same store sales growth negative. Picture: Grant Turner/Bloomberg.

Up-market department store David Jones has hit some of its worst trading conditions since it was acquired by South Africa’s Woolworths Holdings in 2014, with sales growth slowing over the 26 weeks to December 25. It comes as the ending of its concession deal with Dick Smith impacted performance and the timing of Boxing Day pushed sales into the next reporting period.

Its once booming Country Road business has suffered a retreat in its sales growth.

It also comes as arch rival Myer continues along a more robust sales momentum under recently appointed chief executive Richard Umbers. Myer, the nation’s biggest department store, for many years has been trailing David Jones but the roles now look to be potentially reversing as David Jones witnesses slowing sales.

In a trading update to the market last night, Woolworths Holdings said David Jones was hit by a number of factors that sent its same store sales growth negative.

“David Jones’ growth was affected by the timing of Boxing Day, which falls into the second half of this year as well as last year’s termination of the Dick Smith electronics concession,’’ the company said.

“This negatively impacted sales growth by 2.7 per cent and 1.6 per cent respectively.”

Adjusting for both, David Jones sales were 4 per cent higher than the prior year, in Australian dollar terms. The retailer’s like-for-like sales growth, a better indication of sales performance, were not released. Retail space grew by a net 3.4 cent.

Country Road Group sales were also negatively impacted by “the timing of Boxing Day and positively by the inclusion of Politix sales post acquisition (-1.1 per cent and +1.8 per cent respectively),’’ Woolworths Holdings said.

Adjusting for both, Country Road’s sales were 0.9 per cent lower than the prior year in Australian dollar terms. Retail space, excluding Politix, grew by a net 2.2 per cent.

Deustche Bank analyst Michael Simotas said he believed David Jones might have accelerated in the last seven weeks towards December 25, as promotional activity in the sector picked up.

“(Woolworths Holdings) management did not provide colour on trading performance but our channel checks suggest aggressive discounting in apparel leading up to Christmas due to the late start to summer.

“Some retailers discounted early to clear inventory. However, channel checks indicate Myer had strong foot traffic and performed relatively well in a competitive segment. However, we expect general merchandise to remain under pressure resulting from concession mix and a shift in sales trends from pre-Xmas to post-Xmas across the market.’’

Country Road has hit a number of operational issues in the last few years including recently being forced to appoint its third CEO since 2014 It has also floundered due to fashion missteps that have turned shoppers off.

In November David Jones outed itself as the latest fashion victim of the late start to winter after promotions and heavy discounting across the retail sector to clear seasonal stock saw the department store’s near double-digit sales growth almost grind to a halt.

At the time it revealed David Jones’ total sales for the 19 weeks to November 6 had grown by only 2.2 per cent.

However, like-for-like store sales grew by only 0.6 per cent (after adjusting for the impact of the discontinued Dick Smith concession).

It marks a significant slowdown in David Jones’ sales performance, which for a long time had trounced rival Myer. In July David Jones posted an 8.4 per cent increase in sales in Australian dollar terms and robust 7 per cent growth in like-for-like sales for the 52 weeks to June 26.

At times David Jones’ sales momentum had pushed beyond 10 per cent, driven by radical changes to the business since it was bought by Woolworths Holdings for $2.2bn in 2014.