Shrinking sales ... DJs has reaffirmed a 15 to 20 per cent decline in its first-half profit. Photo: Penny Stephens
Upmarket retailer David Jones this morning posted an 11.2 per cent fall in total sales for the first quarter as a combination of store refurbishments and consumer worries about the economy sapped demand.
Despite the tough trading conditions, though, the retailer is sticking to its profit guidance of as much as a 20 per cent profit decline for the first half.
Shares of David Jones sank in early trading, losing as much as 17 cents, or 5.7 per cent, to $2.80.
David Jones said total sales were $414.3 million for the three months to October 29 and on a like-for-like basis were down 11 per cent for the period from a year earlier.
The company has reaffirmed 15 to 20 per cent decline in its first-half profit, noting that trading had improved slightly recently.
David Jones chief executive Paul Zahra said there had been better trading in October and the first few weeks of the second quarter.
"Whilst trading improved in October and November 2011, it continues to be negative on last year," said Mr Zahra.
David Jones had flagged in September that first-quarter sales would likely drop about 10 per cent, although it said Christmas trading and summer sales should still ensure it meets its guidance for a fall in first-half profit of between 15 and 20 per cent from a year earlier tally of $105.7 million.
Earlier this month, Australia's biggest department store chain, Myer Holdings, said same-store sales fell 5.1 per cent in the first quarter and reiterated annual net profit was likely to fall as much as 10 per cent.
Investors will get more insight into the state of the country's retail sector later today when Woolworths holds its annual general meeting. Myer holds its AGM tomorrow.
'Wealth effect'
Mr Zahra said first-quarter trading had been disrupted by store refurbishments at key locations, price deflation especially in electricals and a higher mix of discounted stock being on sale.
However he said the upmarket department store was well placed to capitalise on the upcoming Christmas period and clearance sales in January.
The department store’s customer base has been hit hardest by ‘‘the wealth effect’’, Mr Zahra said.
That included volatility in equity markets, a weak housing market, particularly at the top end, employment uncertainty in certain white-collar professional sectors, and uncertainty surrounding Europe’s sovereign debt crisis, which had caused weaker consumer sentiment and increased household savings, he said.
Proof of this effect was that the most-marked decline in trading was experienced at the company’s stores in the best demographic areas, Mr Zahra said.
The company also said it would introduce a new point-of-sale system from the middle of next year, which would increase the speed of processing transactions and refunds, and introduce gift receipts for customers.
The cost of the new system would fit within David Jones’ capital expenditure of about $80 million per year, and mostly would be incurred in fiscal 2011 and fiscal 2012, the company said.
More to come
egreenblat@theage.com.au with Reuters, AAP
