David Jones plans to revolutionise food shopping in Australia with an upmarket alternative to your usual trawl through the aisles.
The chief of David Jones’ South African parent company Woolworths Holdings group (no relation to the Australian supermarket chain) said a team was already under construction and staff were already negotiating with top quality food producers.
Shoppers will get their first taste of the new-look food business this year and it’s going to revolutionise grocery shopping in Australia, according to Ian Moir.
“People aren’t getting a good enough experience from food shopping in Australia,” Moir said.
“There’s no equivalent to (UK upmarket food retailer) Waitrose… and yet there is a consumer base that would respond to that.”
The food operation is expected to grow into one of David Jones’ most profitable divisions but Moir said it was important to get the groundwork right and nurture relationships with local suppliers, like they have for their South African food business.
“Over the coming year we will make some transformational changes to the business,” Moir said.
“This could be a big business in time…and we believe we will get a great return on capital but we have to get it right.”
Moir was spruiking the food business following the release of Woolworths’ half year results, which showed strong ongoing sales growth at David Jones but a 3 per cent slide in profits.
David Jones blames the fall in earnings on its investment in the department store business, particularly the launch of its private label fashion brands.
Three South African fashion labels were rolled out in July-August last year, including Studio. W, the RE: denim line and lingerie label JT One.
Sales of the new labels have not gone as well as expected, according to Moir but he blames this on system failures rather than the product lines or David Jones customers.
And he acknowledged more investment was needed to build the profile of the brands and make connections with shoppers.
Moir said the performance of the new brands had been mixed but customers were starting to respond to the new labels and they were profitable.
The department store rolled out its first collection of David Jones branded apparel last week and that will be backed up with the launch of the David Jones premium label range later this year.
David Jones’ home brand labels, including its mature brands such as Country Road, Witchery, Mimo and Trenery are expected to account for about 20 per cent of total apparel sales.
Analysts have questioned wether David Jones can continue to achieve double digit sales growth but Woolworths is confident ongoing upgrades to its back end systems will support growth.
However Moir acknowledged it was difficult when the business was cycling very high comparable sales and grappling with the impact of global economic factors.
But he was upbeat about the retail outlook in Australia and the opportunities up for grabs in bearish conditions.
“If there is more of a slowdown in China confidence will come down,” Moir said.
“If you can be good when times are tough you have more chance of taking market share than in a good period.”