David Jones boss Scott Fyfe says shoppers turning cautious as rates rise

A few weeks out from the Melbourne Cup consumers weren’t shopping the way David Jones boss Scott Fyfe thought they would — then came the Cup Day rate rise.

David Jones chief executive Scott Fyfe said sales leading into the spring racing carnival were lower than expected, with interest rate rises the likely culprit. Picture: Luis Enrique Ascui

It was a few weeks out from the Melbourne Cup and consumers weren’t shopping the way David Jones boss Scott Fyfe thought they would.

Shirts, ties and handbags were doing a brisk trade but more expensive items such as complete outfits for the race that stops a nation and the spring racing carnival in general were proving a bit harder to shift than expected, or hoped.

That’s because, according to Mr Fyfe, on their minds was the spectre of the Reserve Bank hiking interest rates on the afternoon of the Melbourne Cup — indeed just shortly before the race itself — as well as all the previous interest rate increases and they were reining in their spending.

“It was probably below expectations in terms of where we were, we saw consumers buying into lower priced items and really focusing on updating their complete outfits rather than buying a full outfit for the season,” Mr Fyfe told The Australian.

“So certainly the areas that did very well for us were accessories, bags, fascinators for women, shirts and ties for men. But we really saw customers being conservative about what they have spent on the race season and obviously the cost of living pressures of going to the races and what people spend on food and entertainment, they’ve got to make the budget go further.”

David Jones wasn’t alone. The last weeks have seen a string of retailers update the market on recent trading conditions which has revealed sliding sales growth, with Country Road, Estee Lauder, the nation’s largest footwear retailer Accent Group, home furnishings chain Adairs, sneakers store Culture Kings, bookseller Booktopia and the US owners of underwear brand Bonds all testifying to a slower and timid consumer.

“We have seen the economic headwinds really hurt customer spending, I think that’s probably been through September and October,” Mr Fyfe said as he reflected on the lead into the spring racing carnival and the interest rate hikes pushed through by the RBA.

“The increase in the (interest rate) base rates on Melbourne Cup day definitely impacted consumer confidence and I think consumers had been living with the pressures that they were under since June and obviously with that (interest rate) increase the consumer confidence really hit our customers.

“We can see that through our own sales but also our partner sales.”

David Jones CEO Scott Fyfe. Picture: Jason Edwards

The David Jones department store, with its billions of dollars in sales, has a perfect perch to see the trends and waves of sales, or lack of sales, for the premium and luxury fashion and apparel sector.

The CEO believes that last rate rise on Melbourne Cup day certainly “knocked consumer confidence”.

“I think it definitely did, I think people since June had readdressed what their personal bills were and what the cost of living pressures were, and I think that added pressure as you went into November was a real blow for customers.”

His feelings on what happens next are clear and would be the hopes of other retail CEOs.

“Clearly as a retailer we would hope there aren’t any more rate rises, we want to protect consumer confidence and we want to make sure that consumers are given the best opportunity they can to shop with the disposable income they have.

“And as retailers we would want the RBA to keep it (interest rates) where it is if they can.”

Mr Fyfe wouldn’t detail the current sales performance at David Jones, the up-market department store now owned by Anchorage Capital after it paid $100m for the retailer, however he did say that foot traffic in his 42 stores was down around 5 per cent.

Encouragingly there had been a reversal of the poor sales momentum in the last days and fortnight, Mr Fyfe said, as shoppers began to turn their mind to the Black Friday sales with the seasonal campaign now proving bigger for the $400bn retail sector than Boxing Day sales.

“We are about 5 per cent down on foot traffic coming into our stores, which we have seen through September and October, which is obviously a concern as we go into Christmas. But what we can say is that for Black Friday we have seen that reverse, and we have brought some of our Black Friday deals forward in a positive trajectory on foot traffic and we’re seeing a very positive trajectory on conversion (customer interest) which is leading to positive sales.

“The last two weeks have been very strong for us.”

And what comes next? Or rather what is it David Jones and other retailers are hoping for? In the fashion and apparel industry they all want a traditional hot Christmas — as opposed to the washout last year as much of the east coast was blanketed in cold and rainy weather — to give them the opportunity to sell the season’s clothes and homewares.

“I think where David Jones really does well is when we have consistency of hot weather. We have got some great ranges in terms of swimwear, some great ranges in terms of summer footwear, shorts, T-shirts and polo shirts. We know that our consumers go on holiday, particularly over the festive period and into January, so some hot weather is great for us, it brings some optimism to everyone.”

It’s optimism the retail sector will be building its hopes on for the crucial Christmas and summer sales, but stubborn inflation and economic challenges could force the hand of the RBA to dash those hopes.