David Jones is delivering sales growth to its South African parent company Woolworths Holdings well ahead of expectations.
Expansion of private label brands helped David Jones increase sales by 11.2% for the half year to December, according to a market update by Woolworths Holdings (no connection to the Australian supermarket chain), which acquired the Australian department store in a $2.1 billion takeover in 2014.
Retailing is challenging in Australia now with high costs and increasing competition from online players.
David Jones’ main competitor, Myer, isn’t doing as well. Myer sales in the first quarter were up 3.4% to $714.8 million, an improvement on the full year which saw a rise of just 1.67% to $3.195 billion.
Myer is working to a new strategy, which includes $480 million capital investment and a target of greater than 3% improvement in sales between next year and 2020.
Woolworths Holdings says David Jones results are well ahead of both the Australian department store and specialty clothing market.
Sales in comparable stores grew by 9.7%.
Contribution to profit at Woolworths Holdings by David Jones increased by 19%. Adjusted profit before tax was $A60 million.
Country Road sales in Australia grew by 13.4% despite a disappointing performance by womenswear.
Higher markdowns resulted in the gross profit margin declining by 1.3% to 61%.
Woolworths Holdings expected trading conditions are expected to become more difficult both in South Africa and Australia as a result of the deterioration in the outlook for the global economy,
“Trading for the first six weeks in the second half of the financial year has been in line with that of the first half,” the company says.