David Jones sales result testifies to slump in consumer confidence

David Jones has posted its first fall in store sales since being bought by South Africa’s Woolworths Holdings in 2014.

Model Natalie Sole looks for bargains at end-of-year sales. Pic: Steve Holland

Up-market department store David Jones has posted its first fall in like-for-like store sales since it was bought by South Africa’s Woolworths Holdings in 2014.

The result highlights the sombre state of the nation’s retail sector as shoppers abandon stores, with not even aggressive seasonal sales able to end the malaise.

In a trading update delivered overnight, Woolworths Holdings testified to the slump in consumer confidence in Australia and the drop-off in foot traffic to its David Jones outlets.

However, its struggling Country Road Group looks to have turned the corner, and showed positive sales momentum for the 12 months to June 2017.

The poor state of affairs in Australia, with David Jones and its Country Road Group its flagship retail assets, means Woolworths Holdings is warning that its full-year profit will be as much as 10 per cent down on the previous year.

Australia’s retail sector has been under sustained pressure for more than a year, marked by intense competition, aggressive discounting and a collapse of consumer confidence that has drained sales at the checkout.

Since 2014, when Woolworths Holdings bought David Jones for $2.3 billion, the department store chain has outperformed the general retail sector, trouncing rival Myer with double-digit sales growth.

But that growth has now ground to a halt, and gone negative for the first time under Woolworths Holdings’ ownership.

Woolworths Holdings said David Jones´ headline sales had increased by 1 per cent in Australian dollar terms, with the termination of the Dick Smith electronics concession last year impacting growth by 1 per cent.

However, in the retail sector like-for-like, or comparable store growth, is viewed as a much better indication of performance as it strips out the impact of new store openings.

For the 52 weeks to June 25, David Jones’ comparable stores declined by 0.7 per cent, with retail space declining by a net 0.8 per cent. “Whilst relevant market share has grown, sales growth slowed in the second half, as falling consumer confidence resulted in lower footfall,’’ Woolworths Holdings said in a statement.

At the half year David Jones’ comparable store sales had only grown by 0.5 per cent, with the cracks starting to appear in what to date had been a stellar performance by David Jones under Woolworths Holdings’ ownership.

David Jones isn’t alone.

In May, Myer reported that its total sales fell 3.3 per cent in the fiscal third quarter, which the company said reflected challenging trading conditions and inclement weather. The fall ended a run of 13 consecutive quarters of same-store sales growth.

There was some good news in the Woolworths Holdings update, as Country Road Group sales increased by 5.1 per cent in Australian dollar terms and showed a marked improvement in the second half, notwithstanding the difficult trading conditions.

Sales in comparable stores were still negative, however, and declined by 0.4 per cent. Country Road Group includes retail brands Country Road, Trenery, Mimco, Witchery and the recently acquired Politix chain.

“Country Road´s above-market performance reflected the ongoing improvements to ranges during the year,” the company said.

Country Road Group has struggled for a number of years as it churned through three CEOs and lost customers thanks to fashion missteps.