Leaked internal David Jones accounts show sales falling sharply over June
David Jones’ city, suburban and regional stores have experienced double-digit sales retreats thanks to a sharp deterioration in consumer confidence.
David Jones’ city, suburban and regional stores have experienced double-digit sales retreats – some as much as 30 per cent – following a sharp deterioration in consumer confidence brought on by rising interest rates and a hit to household budgets.
The decision by the Reserve Bank to push up the official interest rate in May and June is being blamed for much of the lightning-fast reversal in sales growth as the department store owner grapples with a consumer facing dwindling discretionary spending power.
It can be revealed the nation’s premier up-market department store is struggling to meet management sales targets and budgets for June as shoppers pull back their spending habits to preserve savings for higher mortgage repayments, rents and other bloated cost-of-living expenses.
Leaked internal sales spreadsheets from David Jones, obtained by The Australian, show widespread plummeting sales across its flagship stores as well as suburban and regional stores between June 4 and June 10.
This has placed the department store hopelessly behind its sales forecasts and trails sales for the same time last year by about 10 per cent.
Sales for David Jones’ Warringah Mall store in Sydney are down 20.54 per cent year on year, in Melbourne’s Highpoint shopping centre David Jones is down 20.16 per cent while at Eastland David Jones on the fringes of eastern Melbourne, sales are down 38.96 per cent compared with the same period last year.
Even in the moneyed Melbourne suburb of Malvern the local David Jones has witnessed a 19.01 per cent sales decline compared with the same time last year.
The sales plunge that has flared up in June for David Jones – from the Sydney CBD to Doncaster in suburban middle-class Melbourne, Indooroopilly in Brisbane and Wollongong and Tuggerah in the regions – coincides with the week the RBA increased the official cash rate for the 12th time in little over one year.
Internally, David Jones leadership team is pointing to the past two rate rises in particular – May and June – which have severely depressed consumer confidence, especially for homewares and big-ticket purchases.
The confidential June sales report shows David Jones faces an anxious consumer who is diverting money normally spent on highly discretionary fashion and accessories – such as Christian Louboutin shoes or Gucci handbags – to basic necessities.
The nation’s $400bn retail sector now fears a marked slowdown that could plunge Australia into recession.
The internal David Jones sales report for early June shows total sales across David Jones’ 42 stores and online of $50.5m, which is well behind forecasts of $56m and 10.8 per cent behind the same period last year.
Its flagship Elizabeth St store in the heart of the Sydney CBD has booked sales of just over $7m for the week, which was well below the management forecast of $7.634m. That city store’s sales are currently 6.87 per cent weaker than the same time last year.
Although sales at its Bourke Street Mall store in Melbourne were up 13.51 per cent on last year, thanks to a post-Covid bounce, among its eight key flagship stores that drive the department store’s earnings sales were down between 6 per cent and 18 per cent on last year.
The sales drought comes only three months after the 185-year old David Jones was sold to private equity firm Anchorage Capital Partners for about $100m. The new buyer had promised to restore the retailer to its former glory.
But now in some of the nation’s most well-off suburbs, where designer clothes and fashion are considered a need rather than a want – David Jones is struggling to get shoppers to make a purchase.
David Jones’ “group 1” stores, which include department stores in locations such as Bondi Junction, Chadstone and Adelaide Central, drew in total sales of $10.93m for the period, down 13.46 pert cent on forecasts and collectively down 11.82 per cent on the same period last year.
Although David Jones’ online platform generated sales of $10.419m for the period, slightly ahead of forecasts, it was still down 3.98 per cent on last year.
Bondi Junction sales fell 13.6 per cent below forecast and 17.34 per cent compared with the same time last year. At Chatswood Chase the, the store pulled in $1.647m in sales, which was 7.8 per cent below management’s forecast and 9.39 per cent short compared to last year.
A spokesman for David Jones told The Australian that June was traditionally a quieter month for retail, however the cumulative impact of 12 interest rate rises was weighing on shoppers.
David Jones had set itself “aggressive” sales targets for the year, which were made much harder to reach especially in the wake of the June rate increase by the RBA.
“Whilst we did take into account the headwinds we knew were coming in the Australian economy, we did set ourselves aggressive targets for the year,” the spokesman said.
“Since the last interest rate hike, we have seen customer traffic in store slowing and foot traffic is down on last year. Traffic online remains strong, but we are seeing customers becoming more selective in their purchases.
“We are looking at ways to increase conversion but there is no doubting the trading environment is getting harder as the RBA’s aggressive campaign is certainly biting with consumers.
“Many retailers are discounting heavily at the moment and customers have been conditioned to look for bargains at this time of the year. We are in our second week of discount but we cleared a lot of older stock earlier in the year and so we are not looking to compete with all the sales in the market.”
David Jones chief executive Scott Fyfe told The Australian the past two RBA rate rises had a significant impact on consumer confidence and traffic at its stores, while the fashion and broader retail sector was pushing through very high discounting at the moment, which was impacting everyone.
“The amount of discounting in the market is significantly higher than it was this time last year; we are seeing 40, 50 and up to 70 per cent off in some of our key competitors,” Mr Fyfe said.
The department store had also done its own stock clearance and high discounting in March before David Jones was sold to Anchorage, which meant that in June it had a lot less stock on clearance available for shoppers. David Jones had about 20 per cent less sales stock than this time last year which was impacting its sales momentum.
Mr Fyfe said David Jones was still trading at about 11 per cent up on pre-Covid sales.
It was only in March that David Jones released its sales update to the market that showed, despite higher interest rates and the soaring cost of living, its shoppers hadn’t at that time moderated their spending habits.
Latest accounts produced for David Jones by its then owner, South Africa’s Woolworths Holdings, revealed that for the first eight weeks of calendar 2023 sales rose 13.6 per cent.
However, later that month Mr Fyfe said he did fear the Reserve Bank’s previous two interest rate increases had begun to cause consumers some pause for thought before making a purchase, especially for some of the department store’s luxury fashion and apparel items.
Mr Fyfe, who has run David Jones since 2020 for the previous owners and now is running it for Anchorage, said in March 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.
But the latest string of interest rate rises, especially the June lift to the official cash rate which ruined many household budgets, looks to have wrought a heavy blow to its sales.