David Jones struggles in weak environment despite e-tail surge
Upscale Australian Department store David Jones, which is the key retailer of high-end European and American brands in its home market, has seen its sales and earnings falling.
Operating profits at the company fell as much as 39% to A$36 million in its latest half year as its South African owner, Woolworths Holdings, continued to invest money in improving its stores.
The latest profits plunge came on top of a 30% drop in the previous year, which means profits have been decimated in just two years. In the equivalent period in 2016 they were $110 million. Adjusted operating profit fell by 28.8% to $47 million.
Total sales edged up only 1% to A$1.12 billion with comparable sales rising 0.9% in the first half to December 23. But there was good news on the company’s e-commerce operations which rose 46%. However, the closure of the Sydney flagship dragged the figures down with the Elizabeth Street location currently undergoing a $400 million renovation.
The weak sales figures were also held back by slowness in the few weeks before Christmas with the company saying that sales had dropped noticeably as the Christmas season progressed with lower footfall and consumers reining-in their discretionary spending.
This meant that David Jones was forced to be promotional and that led to the gross profit margin falling from 40.7% to 38%.
And the bad news seems to be continuing with management saying that in the second half, January and February sales have dropped 3.1%, again mainly as a result of disruption at the Elizabeth Street flagship. However Woolworths CEO Ian Moir also said that consumer sentiment has moderated this year so even without the renovation disruption, there would be some softness in trading.
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