High hopes for David Jones, Country Road fashion growth

SOUTH African retail giant Woolworths Holdings expects David Jones’s fashion business to grow faster than the broader clothing market this year.

Inside A David Jones Ltd. Store Following Woolworths Of South Africa's $2 Billion Acquisition

SOUTH African retail giant Woolworths Holdings, which last year paid $2.2 billion for department store chain David Jones, says it expects DJs and its local Country Road fashion business to grow faster than the broader clothing market this year.

Releasing its interim results in South Africa this afternoon, Woolworths also confirmed the intense competitive nature of the local clothing and apparel scene with its Country Road stores suffering slimmer margins due to a higher rate of price markdowns.

Importantly, its David Jones business — which is Australia’s second biggest department store behind market leader Myer — looks to continue growing its sales and earnings at a strong rate as the new management team at Woolworths take control of the store network.

Woolworths said sales at David Jones for the 26 weeks to December 28, were up 2 per cent while operating profit was 10.3 per cent better at $107 million.

For the 2013-14 half year — its last interim report before it was taken over by Woolworths — David Jones posted pre-tax earnings of $91.6 million. That result was for the six months to January 25.

Woolworths has had control of David Jones since August 1, when shareholders voted in favour of its $2.2 billion takeover bid.

The inclusion of the David Jones business helped Woolworths Holdings total sales jump 55.2 per cent for the half.

At Country Road, which it gained complete control of last year as well, when it bought out minority shareholder Solomon Lew for $213 million, sales were up 9.2 per cent as operating profit lifted 9.4 per cent for the half.

Woolworths said that comparable store sales were 5.3 per cent higher but gross margins fell 0.7 per cent due to higher markdowns especially in women’s wear.

Last year, rival Myer also conceded that during the first quarter of 2014-15 women’s wear had suffered due to competition and a pullback in sales.

Woolworths remains confident about the performance of both its key Australian retail businesses this year despite the tough trading conditions.

“In Australia there are early signs of an improved retail environment and we expect sales in both David Jones and the Country Road group to be ahead of the market,” the company said this afternoon.

Woolworths chief executive Ian Moir said it was a good set of results, with all business units performing ahead of the market despite current tough trading conditions.

‘’We are progressing well with the integration of David Jones and the full ownership of the Country Road Group, which has positioned us as a leading southern hemisphere retailer and makes us better able to compete with the ever increasing presence of northern hemisphere retailers.”