David Jones Lands in Hot Water Over “Tough Trading”

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By Published On: July 20, 20180 Comments

While Woolworths Holdings is warning of future profit losses over David Jones' poor performance, its other Australian retail venture, Country Road, is making waves with its online sales.

The owners of David Jones claim “extremely challenging” conditions are taking a toll on the embattled department store chain, as well as its other Australian retail venture, Country Road.

Woolworths Holdings released its latest trading update on the Johannesburg Stock Exchange on Thursday afternoon, revealing an increase in comparable sales of 2.7 percent, with total sale increases of 2.2 percent for David Jones for the period ending June 24.

Although, despite small increases for its half-yearly sales, on a full-year basis, David Jones has reported total sales 0.9 percent lower than the same 12-month period in 2016-17 and 0.4 percent lower on a same-store basis. A growth of 21.4 percent in online sales also wasn’t enough to offset this loss.

Country Road also experienced mixed results, reporting like-for-like sales were down 1.8 percent, while online sales, which account for 18 percent of the businesses total revenue, grew by 20 percent.

“2018 has been a difficult year for the group as we contended with extremely challenging trading conditions in Australia and South Africa, as well as poor product execution in some areas of womenswear,” the company said in its statement.

“The disruption experienced during the year by the implementation of new inventory and online systems and the head office relocation impacted both gross margin and costs.”

The company also warned that “extremely” challenging trading conditions would likely leave a dent in Woolworths Holdings’ profits, with annual profits reportedly expected to fall by as much as 20 percent. A Reuters poll of 10 analysts, however, have released predictions of lower drops, forecasting a decrease in sales of roughly 8.5 percent over the next few months.

In South Africa, headline earnings per share (HEPS) for the 12-months ending on June 24 are expected to weaken to roughly 336.7 to 357.8 cents in local currency.

It’s been a tough couple years for David Jones and its South African owners, with the company citing “corporate restructures” for the dismissal of its Australia Regional CEO, John Dixon back in May. Rumours of a merger between embattled department stores, David Jones and Myer also continue to emerge, only to get quashed shortly after as both department stores face an uncertain future.

Like fellow struggling department store, Myer, David Jones’ revenue has been on the decline for some time now, with the business pushing through a $712 million impairment charge earlier this year.

“Today’s write-down reflects tough and unprecedented trading conditions, a cyclical downturn and structural changes that have impacted performance across the Australian retail sector,” Woolworths told the Johannesburg Stock Exchange at the time of the write-down.

As a result of Woolworths Holdings’ continued re-evaluation of its Australian businesses, earnings per share for David Jones stocks are expected to drop to a loss of somewhere between 340 and 396.7 South African cents.

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Heather Bone