DJs out of puff in the retail race?

The latest sales results from David Jones offer little hope of a turnaround in time for Christmas and give an insight into the deep-seated challenges facing the retailer.

At first glance it might appear that David Jones’ first quarter sales results build on that sliver of optimism generated by last week’s similar announcement from its main rival, Myer.

With both the big department store groups reporting their first positive sales growth for two years and both also producing comparable stores sales growth it might appear that the long and brutal retail recession has finally ended.

Myer last week reported total sales growth of one per cent and comparable stores sales growth of 0.8 per cent. David Jones today disclosed a 0.3 per cent increase in both total and comparable stores sales.

Neither of those sets of numbers suggest a significant rebound in sales but at least they have stopped falling.

The David Jones, numbers, however, highlight how weak that apparent uptick in sales actually is.

The first quarter of last year was a shocker for retailers, particularly the department stores, and for David Jones in particular.

Where Myer experienced a 3.5 per cent fall in sales last year David Jones was savaged by the new consumer conservatism, with first quarter sales plummeting 11.2 per cent. That puts today’s numbers in perspective – David Jones has stabilised its sales, for the moment at least, on a substantially lower base.

The relative performances of the two department store operators could be attributed to their market positioning. David Jones is focused on a relatively narrow market
segment at the premium end of the market whereas Myer has a far broader offering.

It might also be due to the relative stability of Myer’s senior management team and their retail strategies against the loss of senior retail talent within David Jones, where Paul Zahra is grappling with a fall in the group’s financial services income streams, the need to upgrade the group’s technology platforms and an attempt at a major overhaul of both its costs and service standards. Zahra is trying to deal with a multitude of complex and deep-seated challenges.

While Zahra said today that the group’s higher margin categories delivered positive sales growth and that trading in the first weeks of the second quarter was tracking broadly in line with the first quarter, that does signal that conditions for the department store groups remain tough.

The Myer numbers had generated some mild optimism that the succession of interest rates cuts by the Reserve Bank this year were finally starting to feed into consumer confidence and discretionary spending.

The fact that David Jones, cycling last year disastrous plunge in sales, could only manage such a meagre improvement says that the environment remains tough and that the prospect of a surge in sales over the Christmas period on the back of steadily improving retail conditions is receding.

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