Sales rise 11pc, but profit slips.
South African Woolworths Holdings’ interim results have been released, revealing that David Jones’ sales have risen 11.2% to $1.149 billion for the six months to Christmas.
However, CEO Ian Moir (pictured) said the company was bracing for an expected deterioration in the outlook for the global economy even as it improved its store offer, private label fashion range, back-office systems and competitiveness.
Moir said the department store had felt zero impact in 2015 from Myer’s radical transformation during the half that saw it freshen its marketing, strip out underperforming brands and revitalise its store ambience.
“The first few weeks (this year) have been strong; we have good foot traffic, we have good sales, profitable sales,” Moir said.
He also told the media that a downturn in China and the knock-on effect to Australia’s economy remained a concern, “Good businesses trade well in tough periods, and that’s when you can take more market share. If you can be good when times are tough, then you have got more of a chance of taking more market share from your competitor in a good period, that’s my view.”
During the first half David Jones reported comparable store sales growth of 9.7%, down from 12.2% earlier in 2015, but still more than twice the rate of the Australian department store sector, and way in front of Myer which is suffering from flat lining sales.
Underlining the rationale for acquiring DJs in 2014 for $2.1 billion, the department store’s contribution to Woolworths Holdings increased by 19% for the first half.
“Despite the inclusion this year of the clearance month of July, significant once-off costs associated with the launch of private label and other transformation projects, the contribution to profit across the group from David Jones increased by 19%,” Moir said
Meanwhile, extra store costs, restructuring and the launch of private label clothing saw DJs operating profit slip slightly to $104m from $107m. The performance for the half compares against a five-month period in 2015. David Jones’ Country Road business is also showing signs of a slowdown as its profits were hurt by higher markdowns and a poor performance by its flagship women’s wear category.
Country Road, whose brands include Trenery, Witchery and Mimco saw its store costs increase by 12.2% due to the significant increase in trading space.
Country Road group sales in Australasia lifted 13.4%, but same-store sales were flat. Operating profit increased 5.2% to $61m.
“The let-down in the group was Country Road and the let-down in Country Road was women’s wear,” Moir said.