DJs protects margins at cost of sales
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.
Frequently Asked Questions about this Article…
David Jones has posted three successive quarters of declining sales driven by weak consumer sentiment and a strategic pull-back on discounting and promotions. Total fourth-quarter sales slipped 1.3% to $449.8 million, following a 2.2% slide in the third quarter and a 1.4% dip in the second quarter.
Management cut the depth and breadth of discounting (reducing sale durations by about a third) to protect full margins. That move preserved profitability but weighed on actual sales revenue: fourth-quarter like‑for‑like sales were down 2.9% and full-year sales were lower.
For fiscal 2013 total sales were down 1.2% to $1.85 billion, and on a like‑for‑like basis sales fell 1.8%. Fourth‑quarter like‑for‑like sales were down 2.9%.
High‑margin womenswear, beauty and accessories generated sales growth, while home categories — particularly electronics — continued to slide. Men’s and children’s wear were broadly flat. Swimwear had its best fourth quarter in the company’s history thanks to a warm winter.
David Jones struck a deal with Dick Smith to hand over the day‑to‑day running of its underperforming electronics category. Management said this arrangement would not be significant to 2014 earnings.
CEO Paul Zahra said consumer sentiment remains weak and the company expects trading conditions to stay challenging over the next 12 months. He added that the business has been planned to weather tough conditions and be well placed if consumer confidence strengthens.
A balmy winter boosted off‑season demand for swimwear, producing the retailer’s best fourth‑quarter result for that category in its history. The weather shift underlined how seasonal conditions can change shopper spending patterns and category performance.
Investors should watch quarterly sales trends and like‑for‑like figures, the impact of the reduced discounting/promotional program on margins and sales, performance in high‑margin categories (womenswear, beauty, accessories), developments in the electronics partnership with Dick Smith, and any changes in consumer sentiment noted by management.
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