Underperforming: David Jones results are symptomatic of the woeful state of retail, writes Michael Pascoe. Photo: Wayne Taylor
It's another indication of how poorly our mid-market department stores are performing that anyone thought David Jones' third quarter sales result was "good". It was barely "less bad". Only the on-going disaster of Myer made it seem less than woeful.
The optimistic spinners would have you focus on DJ's headline April quarter sales being up 4.1 percent to $407 million, but the like-for-like comparison was growth of 2.4 per cent over the same period of 2013. Wow – the best performance in three years!
"Wow" all right – the best sales growth in three years doesn't even keep pace with our low inflation rate. And the retail market share performance is much worse.
After being told (erroneously) for so long that the Australian consumer was on strike and refusing to spend, it seems to be hard for us to accept that retail sales are actually running at boom-time levels. Today's Australian Bureau of Statistics retail trade numbers for March were down a touch on the past six months but still recorded a solid 0.5 per cent growth for the month to give growth for the year of 6.1 per cent – exactly what retail sales averaged during the noughties and well up on the 2.7 per cent that this decade had been averaging.
The March release leaves us a month short of the latest David Jones sales quarter, but in DJ's second quarter, the department store's like-for-like sales were up by 2.1 per cent on the 2013 period before while trend total retail sales were up by 2 per cent just on the preceding quarter. Total retailing almost did in three months what DJs took a year to achieve. Excluding electronics, which went the way of Dick Smith, DJs claims like-for-like growth of 3 per cent on the previous corresponding period. And that's supposed to be exciting.
But it certainly could be worse – it could be Myer. Like-for-like third quarter sales were flat on a year ago and total sales were down one per cent. And this while the consumer is out shopping like it's 1999.
Of course, profit counts more than sales – and Myer's profit has been sliding for five years now. Apparently that must have always been someone else's fault as the board reappointed CEO Bernie Brookes and gave him a fat pay rise. Bernie has dutifully vowed to return to profit growth next year, something that shouldn't be a stretch during a retail sales boom and after major investments.
Today's ABS figures show the department store sector (which includes the discount department likes of K-Mart and Big W) continues to bleed market share to just about anyone else with a cash register. Trend sales fell 0.6 per cent in March.
Department stores, already the smallest of the six ABS retail categories, are collectively going nowhere, as the accompanying graph shows. And it's worse than that – department stores sales are struggling to recapture what they were four years ago as the rest of the retail world has moved on.
That 2.4 per cent like-for-like David Jones growth compares with a fall of 3.4 per cent in the April quarter last year – the retailer has a lot of ground to make up.
The greatest optimism about the DJs sales figures was reserved for the surge in the on-line sales, 190 per cent to 2.2 per cent of the total. If there weren't brave new owners in the wings, it might well make more sense to sharply reduce the number of physical stores and stick to the virtual.
We're fortunate that the department store sector is the exception to the general retailing rule in Australia. Trend quarterly volume turnover was up 1.1 per cent in the March quarter, the fifth quarter in a row of respectable volume growth.
And the recent star performer – our desire to eat out reflected in cafes, restaurants and catering – remained strong with 1 per cent trend growth in March, but the top spot has gone to furniture, floor coverings, houseware and textile goods with a 1.5 per cent trend jump as the boom in buying housing flows through to what we put in them.
Michael Pascoe is a BusinessDay contributing editor