DJs protects margins at cost of sales

A balmy winter, which has turned apparel trading on its head to give swimwear its best off-season result for David Jones in the retailer's history, has fused with sullen shoppers to post three successive quarters of declining sales at the upmarket department store.

A decision to pull back on its discounting and promotional activities, despite an avalanche of sales from its competitors and other merchandise retailers such as Target, had cost it sales but protected margins.

Total sales for David Jones slipped 1.3 per cent to $449.8 million for the fourth quarter, slightly better than the 2.2 per cent slide in the third quarter and a 1.4 per cent dip in the second quarter.

The last time David Jones recorded positive sales momentum was nine months ago, and chief executive Paul Zahra on Thursday did not hold much hope out for a change to the tough trading conditions even after the distraction of the election disappeared next week.

"While this will ensure we are well placed to capitalise on any strengthening in consumer sentiment as it occurs, we expect that over the next 12 months trading conditions will remain challenging," Mr Zahra said..

"With consumer sentiment as weak as it is we think it will be tough, we have planned the business that way."

Mr Zahra said during the fourth quarter David Jones had focused on reducing the depth and breadth of its discounting events, cutting the duration of sales by a third, and instead delivering better full margin sales.

"I am pleased to report that following 15 months of reducing the depth and breadth of our discounting, we believe we now have a promotional program which reflects the right mix of discounting versus full margin sales periods."

This had hurt actual sales revenue however. For the fourth quarter like-for-like sales, stripping out the impact of new store openings, were down 2.9 per cent. Full-year sales for fiscal 2013 were down 1.2 per cent to $1.85 billion, or down 1.8 per cent on a like-for-like basis.

Mr Zahra said the high margin womenswear, beauty and accessories had generated sales growth in the fourth quarter but it was not enough to counter a continued slide in its home categories, particularly electronics, and a flat performance in men's and children's wear.

Swimwear had its best fourth quarter in the company's history, underlining the impact the warm winter was having on shoppers and their spending habits.

David Jones was continuing to lower its exposure to poor performing categories and was moving out of DVDs and other home entertainment products. A deal with Dick Smith to hand over the day-to-day running of its underperforming electronics category would not be significant to 2014 earnings.