David Jones shares slumped to an eight-week low after the retailer reported that first quarter sales fell more than 10 per cent and confirmed expectations of a hefty drop in first half profit.
While trading through October and November had been encouraging, the department store operator said guidance issued three months ago of a 15 to 20 per cent decline in first half after tax profit was unchanged.
David Jones finished Thursday’s local session as the third-worst performing stock among the top 100, sliding 16 cents, or 5.39 per cent, to $2.81 on a day the broader market finished flat. Only BlueScope Steel and Billabong did worse.
Chief executive Paul Zahra said the retailer was trading through “unchartered territory”, given poor consumer sentiment caused by share market volatility, a weak housing market and high household savings rates.
“Most retailers are in negative territory. We are at the more discretionary end and we are suffering most,” Mr Zahra said in a conference call with reporters.
“The last two quarters have been problematic.”
Mr Zahra said the most marked decline in trading was experienced at David Jones stores located in the best demographic areas.
As an indication of the consumer malaise, Mr Zahra said efforts to boost sales through “beefed up advertising” and more markdowns through June and July were unsuccessful.
“We simply did not get the traffic through the stores,” he said.
“It’s a function of our customer and confidence more generally.”
David Jones said total sales for the first quarter came in at $414.3 million, down 11.2 per cent from the prior corresponding period.
Sales declined 11 per cent on a like-for-like basis, the company said.
First quarter sales were also hit by disruption due to store refurbishments, price deflation in the electricals market, and a higher mix of discounted stock as inventory was cleared, Mr Zahra said.
City Index chief market analyst Peter Esho said the figures highlighted a very bleak sales position during the first quarter.
“The market always knew the number was going to come within that range but there were some hoping for the possibility of a better read,” Mr Esho said in a research note.
“We think it will be hard for the stock to break through $3 convincingly in the current market climate.”
Mr Zahra said there were some signs of encouragement, given improvement in trading during October and November and sales of Christmas items up compared with the prior year.
“The green shoots are really small,” Mr Zahra said.
“I’m pleased that October and November’s certainly been better and we are into those single digit negative numbers.”
Fellow department store chair Myer recently reported a 5.1 per cent decline in first quarter sales.
Meanwhile, David Jones said it would introduce a new point of sale system from the middle of next year.
