DJs upbeat despite another sales retreat

DAVID JONES has recorded its seventh consecutive quarter of retreating sales as shoppers remain reluctant to spend on designer clothing, accessories and make-up, but the upmarket retailer is trying to remain upbeat and is aiming for a return to positive sales this quarter.

By InvestSMART · 24 Aug 2012

By InvestSMART ·
24 Aug 2012

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The chief executive, Paul Zahra, also reaffirmed profit guidance of a 35 per cent to 40 per cent decline in earnings for the 2012 financial year.

The fashion retailer said total sales for the fourth quarter were down 1.3 per cent to $455.8 million with like-for-like store sales also down 1.3 per cent for the period. Second-half sales were 2.2 per cent weaker on a comparable store basis while for the full 2011-12 financial year total sales were down 4.6 per cent and comparable sales 4.3 per cent down.

Presenting the results, Mr Zahra said the business had detected improving sales month to month during the fourth quarter, with David Jones aiming for positive sales in the first quarter of 2012-13.

"That's our aim, it would be great to be in that position of course, we are fully focused as a team to get back to positive growth," Mr Zahra said. The last time David Jones posted positive quarterly sales growth was in the first quarter of financial year 2010-11.

"Whilst the trading environment remains challenging, we have a strong business model, a clear business strategy, a strong balance sheet, good cashflows, ownership of our flagship Sydney and Melbourne CBD stores and the best national and international brand portfolio in Australia," Mr Zahra said.

Mr Zahra said the best-performing categories in the fourth quarter, which included the company's mid-year sale, were womenswear, beauty, menswear, shoes and accessories.

David Jones chose to cut its winter clearance sale by two weeks to six weeks, as it focused on new season inventory and lessened its use of discounting and promotions.

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Frequently Asked Questions about this Article…

What happened to David Jones sales in the 2011–12 financial year?

David Jones recorded a downturn in 2011–12: total sales fell 4.6% for the full year, comparable (like‑for‑like) sales were down 4.3%, and fourth‑quarter sales fell 1.3% to $455.8 million. The retailer also posted its seventh consecutive quarter of retreating sales.

Why have David Jones sales been declining for several quarters?

According to the company, shoppers have remained reluctant to spend on designer clothing, accessories and make‑up, which has driven the retreat in sales for the upmarket retailer.

What profit guidance did David Jones give for the 2012 financial year?

Chief executive Paul Zahra reaffirmed guidance that earnings for the 2012 financial year were expected to decline by 35% to 40%.

Which product categories performed best for David Jones in the fourth quarter?

David Jones said its best‑performing categories in the fourth quarter were womenswear, beauty, menswear, shoes and accessories — a period that included the company’s mid‑year sale.

What is David Jones’ outlook — when does the company expect sales to improve?

Management reported month‑to‑month improvement in sales during the fourth quarter and is aiming for a return to positive sales in the first quarter of 2012–13.

How has David Jones changed its clearance sale and discount strategy?

The retailer shortened its winter clearance from eight weeks to six weeks, focusing more on new‑season inventory and reducing its reliance on discounting and promotions.

What strengths did CEO Paul Zahra highlight that could support David Jones’ recovery?

Mr Zahra pointed to a strong business model and clear strategy, a strong balance sheet and good cashflows, ownership of flagship Sydney and Melbourne CBD stores, and what he described as the best national and international brand portfolio in Australia.

What should investors watch next for David Jones?

Everyday investors should watch monthly trading updates and the company’s results for the first quarter of 2012–13 to see if management’s aim of returning to positive sales is achieved, as well as any commentary on gross margins and promotional activity following the shorter winter clearance.