Retailer woes deepen as high street stalwart David Jones reports 11.2% sales slump, blaming global volatility and the savings conscious consumer. DJs today said total sales revenues are down 11.2% on last year to $414.3 million for Q1 2012.
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The sales were for 31 July – 29 October period and represents a sales decline of 11.2% on 1Q11 and 11% on a like-for-like basis.
The decline was blamed on “disruption” due to the store refurbishment of Chadstone, Victoria and Warringah Mall, NSW stores and “cycling” the opening of the redeveloped Bourke Street Mall, Melbourne store last year.
The “wealth effect” and the GFC was also blamed by the high end retailer for the sales slump, which will up the pressure to deliver sales targets during the peak Xmas buying season.
The downturn in sales for Q1 was spread across all categories particularly in the Home Entertainment and Electricals category.
Price deflation in the electronics department, particularly in TVs, was severely impacted by the strong Aussie dollar and tough competition, David Jones said in a statement today.
“Our customer base has been hardest hit by the wealth effect including factors such as volatility in the equity markets, the weak housing market in particular at the top end, employment uncertainty in certain white collar professional sectors and uncertainty surrounding Europe’s sovereign debt crisis.”
Consumer sentiment weakening and household savings increasing. Company’s stores located in the most affluent demographic areas saw the most marked decline in trading but foot traffic and basket size were down in all stores.
David Jones CEO Mr Paul Zahra said, “Our trading performance in 1Q12 was broadly in line with the guidance we provided at the time of our full year results in September. The challenging conditions we faced in 4Q11 continued in 1Q12.”
Whilst trading improved in October and November, it continues to be negative on last year, Zahra added.
“Our trading performance in 1Q12 relative to our peers reflects the fact that we cycled a relatively strong sales quarter last year (1Q11 was +3.2% vs. 1Q10 on a statutory weeks basis).”
The “wealth effect” hitting the Australian consumer was also cited among the litany of woes affecting the retailer:
“Our customer base has been hardest hit by the wealth effect including factors such as volatility in the equity markets, the weak housing market in particular at the top end, employment uncertainty in certain white collar professional sectors and uncertainty surrounding Europe’s sovereign debt crisis resulting in consumer sentiment weakening and household savings increasing.”
DJ’s now say it is “well prepared” to capitalise on the “all-important” gift giving Christmas & Clearance trading periods and reported “good progress” in clearing excess inventory.
David Jones’ personal shopping service which was launched in August was “well received by customers and is trading ahead of expectations,” according to company statement.
The Chadstone store was completed in mid September and our Warringah Mall store refurbishment was completed in early October and both are “trading well”, Mr Zahra said.
DJs is also continuing to successfully grow its social media sites and its online offering and plans to roll out a “world class multi-channel offering” by mid calendar 2012.
The Company saw an improvement in trading in October and the first couple of weeks of 2Q12 and will generate the majority of its first half yearly profit in 2Q12 in the all important Christmas and Clearance trading periods, it said.
Profit after tax guidance of a 15% to 20% decline for first half 2012 was also reaffirmed.