Industry suppliers to David Jones can feel confident about future sell- through as South African retailer Woolworths, reversed a four-year slide in earnings at the department store. Yesterday, the company reported a 28.8% increase in operating profit to $161 million in the 11 months ended June 30.
It was stronger performances in homewares and beauty along with sales of more full-priced merchandise that helped to lift gross margins to 39.6% from 38.2%, compared with first-half margins of 41%.
The full-year result came after a 10.3% increase in David Jones’ operating profits to $107 million in the five months ended December 31 and followed a 6.4% increase in sales to $1.885 billion – the strongest for eight years – with June-half sales up 10.7%.
Woolworths chief executive Ian Moir (pictured) told the media yesterday, “What we’ve done, what we’ve achieved, how much we’ve changed, seems so remarkable in the period we’re talking about.”
World class store
“It’s turning into a world-class department store,” Moir said. “We’ve only had one year of it, yet the comparable store growth was 3.7%… with second-half comps up 6.5%,” he said. “It’s a much more profitable business than it was.”
Moir has said he wants to lift operating profit margins at David Jones to more than 10% from last year’s 7.6%, compared with 3 per cent at the time of the acquisition (adjusted for rental expenses).
Sales in the first eight weeks of 2016 had “started very strongly”, he said, and above-market sales growth was expected to continue, even though Australian consumer sentiment was weak.
Mr Moir said business transformation initiatives were on track, the customer proposition was well accepted and Woolworths had improved service by adding more full-time staff.
Same-store sales up
At Country Road, operating profits rose 13.3% to $111 million as sales rose 11.5%, with same-store sales up 4.7%.
Gross margins declined 1.1 percentage point to 60.9% because of markdowns in womenswear after “a really bad season.”
Moir described Woolworths plans to invest more than $400 million a “scary amount of money” –– over the next few years on new systems and loyalty programs, visual merchandising, store refurbishments and new stores – to transform David Jones into the best department store in the southern hemisphere.
David Jones received board approval from its new parent this week to press ahead with a new customer relationship management system, which would enable it to letter analyse and reward customer spending and help the retailer lift online sales to 10% of total sales from 3% currently.
“It will be transformational,” Moir said. “We’ll be more objective in decision making and it will create stronger and stickier relationships with our customers within David Jones.”
New Zealand beachhead
David Jones is also moving offshore for the first time, establishing a beachhead in New Zealand by buying Kirkcaldie & Staines in Wellington.