A day after the Australian Bureau of Statistics produced retail sales figures showing good times in our shops,department store retailer, David Jones, has confirmed the strength of the boom.
But at the same time the retailer hinted that it could be losing sales from two Sydney suburban stores if lease negotiations are not settled.
DJS said third quarter sales rose 8.4 per cent jump, taking the nine month sales figures to $1.47 billion. That’s up 8 per cent on the first 9 months of 2006.
That saw the shares rise, then ease several cents to close at$4.83 after hitting a day’s high of $4.93 yesterday.
To make it better the third and fourth quarters of 2006 are when David Jones’ rebound from a couple of sluggish years first appeared and started powering the company’s sales, earnings and share price higher.
CEO Mark McInnes warned at the interim report earlier this year that the growth rate might slow because of the pick up in the third and fourth quarters of 2006 but the company continues to beat expectations.
The ABS said March sales rose 1.1 per cent compared to February, with Department store sales up 3.6 per cent alone (but that might have been influenced by Easter and not fully adjusted, according to some retail analysts).
The ABS said that in original terms (unadjusted which is what the market works off) March sales were 8.2 per cent higher than March 2006.
March quarter sales were up two per cent, or up 7.8 per cent in original terms on the March quarter of 2006 so David Jones has been better than ‘system’
Mr McInnes said the company benefited from strong performances across all categories, including men’s and women’s apparel, footwear and homewares.
“All states delivered strong Sales growth with Western Australia being the stand out performer.”
However, despite the strong sales numbers, Mr McInnes said it would be premature to update the retailer’s guidance for fourth quarter sales, or profit after tax (PAT) growth for the second half of 2007.
“The fourth quarter is the major contributor to sales and profit after tax in the second half of our financial year, so whilst we are pleased with our strong 3Q07 sales growth, we fell that it is premature to update our 4Q07 sales guidance until we trade through the all important May and June trading periods,” he said.
“This is particularly the case given we will be cycling in the high growth of 5.4 per cent experienced in 4Q06.
“Added to this, we have the uncertainty of knowing how trade in July 2007 will compare to July 2006, when we experienced a one-off, sales flow-on effect due to the change in ownership of Myer and the new owners launching their ‘History Making Inventory Clearance Sale’.
“Given we are a trading business with a significant period of the financial year still left to trade and in light of the above factors, we are not in a position to update our 2H07 underlying PAT guidance of 8.5 per cent to 13.5 per cent.”
But Mr McInnes did reconfirm forecast PAT growth for fiscal 2008 of five to ten per cent.
But while the company’s new store at Burwood in Sydney’s inner west opened this month and is trading well; and new stores at Chermside in Brisbane and Doncaster in Melbourne are due to open soon, the retailer has struck trouble at Bankstown and Eastgardens in Sydney.
“The Company’s Bankstown store lease expired in September 2006 and since that date the Company has operated in Centro’s Bankstown centre on a month-to-month lease,” Mr McInnes said yesterday.
“Since the expiry of our Bankstown lease we have added the new Burwood store to our store portfolio, which has given us an additional presence in Sydney’s western suburbs.
“We have over the past 7 months been in negotiations and discussions with Centro in relation to the terms upon which David Jones would consider remaining in the Bankstown centre.
“We will only remain in Bankstown if we can significantly improve our store profitability. Our final position has been put to the Centro Board and we await their decision,” Mr McInnes said.
The lease relating to David Jones’ Eastgardens (NSW) store expires in October 2007. The Company has been in discussions with Terrace Towers (the owner of the centre) although to date, agreement has not been reached.
Mr McInnes said, “Whilst our firm preference is to enter a long-term Eastgardens lease, we are not yet in a position to do so. In the event that an acceptable agreement is not reached, we believe that Myer is likely to enter the Centre.”
