Warm Weather Hurts David Jones' Sales As The Department Store Sticks To Its Guns On Discounting

Paul Zahra and Megan Gale attend the David Jones 175 year celebration at David Jones on May 23, 2013 in Sydney, Australia.

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Warm weather has helped push David Jones’ third-quarter sales down 2.2%, according to the company’s results statement.

David Jones’ this morning posted a total sales revenue of $391.1 million for the third quarter of fiscal 2013, with chief executive Paul Zahra telling the market the retailer had reduced is discounting program, and made progress in getting out of low-productivity categories.

Nice weather hurt sales though.

“The unseasonably warm start to winter impacted our business in particular Womenswear,” Zahra said.

“Despite the warm start to the season our Winter Inventory was well managed and is at lower levels than the previous corresponding period.”

In the results statement Zahra said David Jones was continuing with its strategy of reducing discounting, but that its key June clearance would need to be “competitive.”

“Our view is that the ongoing increase in the depth and breadth of discounting that we are seeing in the market is not sustainable.

Getty/Lisa Maree Williams

“This view is shared by many brands and as a result we have seen an increase in the number of brands looking to convert their distribution arrangements to department store exclusive agreements with David Jones.”

Zahra said however, that in the short term David Jones expects to see heavy discounting as other retailers look to get rid of excess winter inventory.

“Whilst we do not propose to match this expected discounting activity our key June clearance will need to be competitive and we will need to maintain our marketing share of voice.”

What you need to know:

  • 3Q13 Total Sales down 2.2% (3Q13: $391.1 million vs. 3Q12: $399.8 million)
  • 3Q like-for-like sales down 3.4% (3Q13: $386.2 million vs. 3Q12: $399.8 million)

Confidence Continues To Slump

“When it comes to the weather we have such a short winter in Australia and there is not a huge opportunity for Australian retailers to take advantage of it,” Commonwealth Bank retail analyst Andrew McLennan told Business Insider last week.

“Retailers are in the business of growing gross profit dollars. You can drive sales growth through discounting but it won’t grow the gross profit dollar,” he said.

Nimble management is the answer according to McLennan, who favours David Jones over rival Myer for its growth prospects.

“We are overweight DJs and we’re neutral on Myer and the reason for that is DJs may be further behind technology but they’re now catching up,” he said.

Myer looks to be on track to deliver its first full year sales growth since listing in 2009 after posting 0.5% quarterly sales growth last week.

However, despite generating $652.5 million in the third quarter Myer boss Bernie Brookes said he remains cautious about the outlook for retail trading.

Now read: Myer Sales Are Growing But Bernie Brookes Is Still Cautious About Retail

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