By Emma Koehn
Department stores are feeling the pressure as shoppers cut back on discretionary spending, but the boss of David Jones is hopeful consumer optimism will return later this year as the Christmas trading season approaches.
The former owner of David Jones, South African retailer Woolworths Holdings, told investors in a trading update at the end of last week that there had been a “pronounced deceleration” in momentum in the second half of its 2023 financial year as rising interest rates and living costs impacted Australian consumers.
A trading update from the outgoing owners of David Jones said there was a deceleration over the past few months. Credit: Simon Schluter
Woolworths Holdings (which is not connected to ASX-listed grocery business Woolworths) sold David Jones to private equity firm Anchorage Capital in March, but still owns Country Road Group, which includes a stable of brands including Country Road, Mimco and Politix.
Woolworths’ update revealed that while Country Road Group had achieved an increase in sales of 12 per cent for the 52 weeks to June 25, growth slowed to 0.6 per cent in the second half of the year.
At recently sold David Jones, turnover and concession sales for nine months of the year were down by 11.3 per cent relative to the full 12-month period in 2022.
However, turnover and concession sales at David Jones over a comparable nine months rose by 23.6 per cent, which the retailer’s chief executive said was a strong result.
“David Jones, over the nine-month period of ownership under Woolworths Holdings Limited, traded very strongly, delivering growth of 24 per cent vs [last year] and well ahead of budget showing the confidence in the brand and the success of our Vision 2025+ strategy,” David Jones chief executive Scott Fyfe said.
Despite this, Fyfe noted that rising costs were having an impact on trading conditions.
“Off the back of strong sales, the cost of living pressures and constant interest rate rises have delivered tougher trading conditions over the last couple of months.”
He was more upbeat about trading conditions for the rest of this year, saying there will be a point where the consumer outlook improves.
“We expect these headwinds to persist until we enter peak trade and [will] then see customer optimism return with the new season and the run in to Christmas with new collections and even more services and experiences around the country.”
National retail turnover figures from the Australian Bureau of Statistics (ABS) released on Friday showed overall spending declined by 0.8 per cent in June, but the department store sector suffered the largest fall in turnover, down by 5 per cent for the month to $1.8 billion.
The ABS said that weaker spending at end of financial year sales contributed to the drop in overall turnover.
Economists said the weaker turnover figures revealed just how challenging trading conditions had become.
“In a sign of just how much pressure consumers are under, retail spending fell in every category except food retailing, which only increased by 0.1 per cent in dollar terms,” CreditorWatch’s chief economist, Anneke Thompson, said in a note.
Scott Fyfe said he believed the tough conditions would continue but improve in the lead-up to peak trading later this year. Credit: Elke Meitzl
“Given inflation figures for food items are well above this figure, it is highly likely that volume figures, even in the non-discretionary category of food, will have gone backwards when quarterly trade volume data is released this Thursday.”
Consumer data from NAB released on Monday points to how consumers are continuing to re-prioritise discretionary spending to manage their budgets, with two out of three Australians planning a holiday either cancelling or rescheduling their plans.
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