Should David Jones’s (DJS) latest third quarter figures, out yesterday, make investors reassess the performance of Myer?
Last week the market went all gloomy on Myer after it reported an 0.5% rise in top line sales for the quarter and an 0.4% improvement in same store sales.
Yesterday David Jones has reported $391.1 million in sales for the three months to April 27, a 2.2% fall from a year ago and a much more concerning 3.4% dip in same store sales.
David Jones’ shares fell 14c, or 5%, to a low of $2.44 in early trade after the release of the sales report. They later recovered a bit to end off 2c at $2.56.
Myer shares were also lower on a day when the local market had another attack of the vapours.
They fell 6c to $2.43 and closed around down 3c at $2.46. Myer shares have fallen sharply from the $2.68 they closed at on the day the third quarter sales figures were released on May 22. That’s down more than 7%.
DJS YTD – Shares Slide On Result
David Jones’ fall in same store sales confirms those signs of an improvement in the December half year have vanished in the latest period. In fact DJs has not done well at all, despite the protestations from its management yesterday.
Its weak performance puts it in the class of Target, the mid-level department store chain owned by Wesfarmers which recently downgraded earnings and sales for the second half and replaced its CEO.
"Our high-margin beauty menswear and childrenswear categories delivered growth for the quarter, however our overall sales performance was once again adversely impacted by our home categories, in particular electronics which continues to be subject to industry and price pressures," David Jones chief executive and managing director Paul Zahra said in yesterday’s statement.
"In the current environment of cautious consumer sentiment we made a deliberate decision to continue to focus on the areas of our business that we can control namely [gross profit] margins, inventory and costs."
The retailer has previously stated it plans to exit the DVDs, games and music categories and Mr Zahra yesterday said David Jones continued its strategy of reducing its discounting program during the quarter.
"We continued our strategy of reducing discounting throughout 3Q13 (the April quarter) notwithstanding aggressive promotional activity in the market. Most notably our mid-season sale was reduced by one full week and we removed our $10 million floor stock clearance event.
"Our view is that the ongoing increase in the depth and breadth of discounting that we are seeing in the market is not sustainable. This is a view shared by many brands and as a result we have seen an increase in the number of brands looking to convert their distribution arrangement to department store exclusive agreements with David Jones.
“Having said this, in the short term we expect to see heavy discounting as other retailers attempt to address excess winter inventory issues. Whilst we do not propose to match this expected discounting activity our key June clearance will need to be competitive and we will need to maintain our marketing share.
"Our view is that the ongoing increase in the depth and breadth of discounting that we are ssing in the market is not sustainable," he said in a statement to the ASX this morning.
"This is a view shared by many brands and as a result we have seen an increase in the number of brands looking to convert their distribution arrangement to department store exclusive agreements with David Jones.
"Our view is that the ongoing increase in the depth and breadth of discounting that we are seeing in the market is not sustainable,’’ Mr Zahra said.
But he said the annual David Jones June clearance would need to be competitive with other retailers who may start heavy discounting, due to a build up of excess winter inventory.
Last week, rival chain Myer held a ”Super Saturday” stocktake sale to lift sales and shift extra stock from some of its suppliers.
Myer has now strung together four quarters of positive same store growth – it’s not brilliant, but clearly better than what David Jones is managing to do.
And while electronics were a problem for DJs, the sector wasn’t as big a concern for the sector leader JB Hi-Fi which earlier this month upgraded sales and earnings guidance for the year.
