David Jones’ profit drop amid slowing sales

Department store giant David Jones’ sales growth has weakened markedly amid a decline in consumer spending and a poorly received private label clothing range.

DJs recorded a 25 per cent drop in operating profit while total sales edged up one per cent in the year to June 25 compared to the prior year, which enjoyed sales growth of 8.4 per cent.

South African parent company Woolworths Holdings – not related to the Australian supermarket chain – said the collapse of electronics retailer Dick Smith last year, which had concession stores inside David Jones stores, impacted growth by one per cent.

The high-end retailer’s crucial comparable store sales, which excludes Dick Smith, declined 0.7 per cent – sharply lower than the prior year’s seven per cent growth in comparable sales.

“Sales growth slowed in the second half as consumer sentiment worsened, although our share of the department store and specialty market grew marginally,” the company said in a statement on Thursday.

Woolworths Holdings chief executive Ian Moir said David Jones suffered a disappointing private label performance but lessons had been learnt and remedial action was being taken.

The group’s other Australian business, the Country Road Group – which includes the Country road and Witchery apparel brands – had a 5.1 per cent lift in sales and showed a marked improvement in the second half, with newly acquired Politix adding 3.7 per cent to growth.

Sales in comparable stores however declined by 0.4 per cent.

Moir said Country Road’s “above-market performance” reflected changes made to the business over the past 18 months and ongoing improvements to ranges during the year.

Woolworths stated it’s in the process of rolling out its new beauty offering across its clothing and general merchandise division, which will include international brands Chanel and Estee Lauder for the first time.

“Sales growth slowed in the second half, as consumer sentiment worsened, although our share of the department store and specialty market grew marginally,” said Moir.

Looking ahead, Woolworths expects market conditions in the year ahead “to be constrained by the same economic and political conditions that impacted our performance during the year under review”.

“We will continue to invest in various transformational initiatives, most notably in David Jones, and remain  confident that our strategies will deliver future – fit businesses capable of long-term profitable growth. We expect our food and clothing businesses in both South Africa and Australia to continue to outperform their respective markets.”