David Jones boss says RBA rate hikes seeing shoppers think before buying

The boss of the department store warns that the last two rate hikes by the RBA are finally causing shoppers to think before they buy, as Anchorage Capital takes control on Monday.

David Jones CEO Scott Fyfe says the last two rate hikes by the RBA is finally causing shoppers a reason to think before buying. Picture: Jason Edwards

David Jones chief executive Scott Fyfe fears the Reserve Bank’s last two interest rate hikes have begun to cause consumers some pause for thought before they make a purchase, especially for some of the department store’s luxury fashion and apparel items that are exhibiting a slight pullback in growth.

However some of that shine coming off the retail sector is being countered by a return of the Chinese shopper, Mr Fyfe has revealed, with David Jones seeing higher sales and activity across Chinese payment platforms Alipay and China UnionPay.

Despite the elevated interest rate environment and growing economic headwinds, Mr Fyfe said there were no plans for the new owners of David Jones, private equity firm Anchorage Capital, to kick off a round of job losses at the retailer as it gets its hands on the nation’s up-market department store following last year’s $120m takeover.

Mr Fyfe and his management team are now in charge of David Jones under new owners as South Africa’s Woolworths Holdings officially ends its nine-year ownership of the department store on Monday and handed the keys to the business over to Anchorage at 11am (AEDT).

Mr Fyfe says there are no immediate plans to shed jobs, as Anchorage strives to make a return on its investment, although it was on track to close down two more stores to take the David Jones store network to 40.

The string of interest rates triggered by the RBA since May was finally starting to take some of the froth off the top of retail activity, which Mr Fyfe said had become noticeable since the last two rate hikes.

“We know there are headwinds that have been coming. I think the last two interest rate hikes have made consumers more wary. I think they’re being more discerning in what they spend. “So we do see a change of seasonality as we’re going to cooler weather but I think consumers are just being a bit more apprehensive than previously they were,” Mr Fyfe said.

“Certainly from Christmas till now we are seeing a bit more apprehension on customers in terms of (premium and luxury) pieces. Our top end of ranges, some of our luxury pieces, we are just seeing a slight negative, they are still making growth but we are not making the growth that we were pre-Christmas.”

Mr Fyfe’s comments on the top end of the fashion and apparel market are against recent trading updates from David Jones and Myer which showed strong sales momentum between January and March.

Rate hikes are finally making shoppers think twice. Picture: Toby Zerna

The latest accounts for David Jones revealed that for the first eight weeks of calendar 2023 sales lifted 13.6 per cent while at its Country Road Group stablemate, which owns retail brands Country Road, Trenery, Witchery, Mimco and Politix, sales increased by 7.3 per cent. When Myer released its first-half profit earlier this month it said sales over January and February were up 16.1 per cent.

Mr Fyfe, who has run David Jones since 2020 for Woolworths Holdings and now will run it for Anchorage, said the reopening of international borders, improved tourism activity and the return of international students was helping to bolster sales for the retailer — particularly at its flagship CBD stores.

“Typically we notice it at the Sydney store and at Bourke Street, Melbourne, we’ve definitely seen international students coming back, which is great for us. Not to the levels of 2019 but we definitely are seeing increasing trends. And since we saw the Chinese borders opening we’ve definitely seen transactions through things like Alipay and China UnionPay start to increase, which is good news for us.

“And we are hoping that Easter period brings more international tourism to Australia because, you know, we are all relying on international tourism as well as migration.”

As David Jones now enters a new era under the ownership of private equity, Mr Fyfe is confident that there won’t be a slew of redundancies at the department store, even as Anchorage is seeking to maximise its investment and make a return.

“We are not looking at job losses in the short term.

“I think for us, it’s very much business as normal. Our trade continues to be really positive, which is great, and we’ve just got to keep our teams — particularly our store teams and our support teams — really focused on what is their day job. So that is really priority number one for us.

“And then priority number two, is really working with Anchorage on a transformational plan to really accelerate ‘vision 2025’ strategy. Obviously, we’ve got quite a complex IT separation to do over a year’s period so that’s a big focus for us, it’s another piece of the deal we need to complete and agree on with Woolworths South Africa.”