By James Wells in Maui
MAUI: In his presentation to Narta delegates this morning at the Ritz Carlton Hotel in Maui, David Jones chief executive, Mark McInnes, shared some important intellectual property that guides the company’s internal economic forecasting.
Despite debating the release into the marketplace of its confidential economic modeling, McInnes revealed a retail performance chart which over the last 14 years has matched its sales cycles.
“We argued about releasing this into the marketplace,” McInnes said.
“You either believe or you don’t – but we stand by it.”
Using a economic history of retail performance outlined by Access Economics, McInnes claims his company has followed its cycle consistently by either plus or minus one per cent.
McInnes also pointed out that three David Jones managing directors have been sacked at the bottom of cycles displayed on the chart.
“The secret to our business is forecasting in line with an economic cycle,” McInnes said.
The cycle displayed by McInnes predicts a strong Summer 2006, a downturn in 2007 and a return in 2008 before a substantial decline in the period between the beginning of 2009 which should end in the lead up to Christmas 2011.
“There is a dip coming next winter off the interest rate rise coming in November. We believe it will happen.”
He challenged those in the audience that did not trust the forecast and are predicting a soft Christmas.
“You will be wrong. This market will turn. It is going up and we will set macro parameters against it and invest according to that in capital expenditure and people. Then we intend to bring that back and ride through the next profit cycle.”
McInnes also shared an insight into the reasons why David Jones has established a relationship with the Narta group.
“What Narta brings is unique industry experience in an industry that we do not have a leadership position. We have customers and stores, but not an industry position. We are positioned as a long term differentiator – we are the branded department store for women.”
McInnes compared the apparel brands to home entertainment brands sold exclusively by David Jones. Over 65 per cent of apparel brands are exclusive to the female focused premium retailer delivering a similar proportion of sales. In the home entertainment division, just one per cent of exclusive brands exist which deliver just five per cent of total sales in that category.
McInnes also speculated that if the new owners of the Myer department store are successful, they will re-list the business as a public company within three years.
“If they are not successful, they will approach us and we wish to be in the strongest position possible,” he said.
Following the recently announced rollout of three new stores, he believes that there will only be a finite number of stores left to open in Australia.
“We will not be romanced by a rollout of stores in wrong locations,” he said.
“There is probably only two more stores and that is then the end of your natural growth as a department store.”