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DJs turns off music as sales slip

Slump ... customers are shunning David Jones' home products such as electronics.

Slump ... customers are shunning David Jones' home products such as electronics. Photo: Michael Clayton-Jones

David Jones will stop selling DVDs, music and video games as part of a move to exit low-performing categories, as the retailer reported a 1.4 per cent drop in total sales revenue to $590.1 million during the Christmas season.

David Jones chief executive and managing director Paul Zahra said the results for the quarter, which included the Christmas period, reflected growth in high-margin categories such as womenswear, beauty and accessories.

Sales performance 'adversely impacted'

But he said that the company's sales performance was "adversely impacted" by products in the home categories such as electronics.

Shares dropped 1.9 per cent to $2.63 in early trade, but closed half a cent higher at $2.69.

"Our focus is on improving the profitability of sales. We are exiting the low-performing categories of DVDs, music and games," Mr Zahra said.

"We also continue to reduce the depth and breadth of our promotional discounting events and continue to work on changing our category mix to increase focus on higher margin categories."

About 35 per cent of a David Jones store’s floor space is dedicated to home categories such as furniture, homewares and white goods, while the remaining 65 per cent is used to stock fashion and beauty products, a company spokeswoman said.

The department store plans to reduce the floor space for home category items to 25 per cent. A decade ago, products in the home categories took up 45 per cent of a store’s floor space.

Sales revenue for the six months to December was down 0.7 per cent to $1 billion from the previous corresponding period.

The second quarter of sales revenue stretches from October 28, 2012, to January 26.

Last year, the department store’s departing chairman Bob Savage said the firm was expecting flat sales during the holiday period, with consumer sentiment remaining weak despite the Reserve Bank’s interest rate cuts in October and December.

Mr Zahra said at the David Jones' shareholder meeting in November that consumer sentiment was the company's biggest drag on performance.

Omni-channel retailing

Commonwealth Bank retail analyst Andrew McLennan said while the headline results were disappointing, the key profit drivers of the stores, such as fashion and beauty, had performed reasonably.

He welcomed David Jones’ focus on improving their sales profitability as significant costs incurred from upgrading the point-of-sale systems and investing in omni-channel retailing - the seamless integration of bricks-and-mortar stores and online shopping channels - kick in.

“The headline [result] was weaker-than-expected but they are well-positioned for when the consumer does come back, so it’s not too negative overall in terms of an outcome,” Mr McLennan said.

“They were very much behind the curve with their capabilities in [information technology] and they’ve made significant advances in the last 12 months, so I think that those factors are more important to the business in the long-term than deflation in consumer electronics.”

Changing consumer behaviour

Consumers have increasingly moved towards online shopping and music and films internet downloads, leaving traditional bricks-and-mortar retailers such as David Jones struggling to profit from the entertainment sector.

Sales of traditional retail video games also fell 23 per cent last year, as consumers turned to digital downloads and game apps, data from market researcher NPD Group Australia released this week showed.

"The big trend for consumers is that they see online as a discount channel. So it’s more lucrative to purchase a product online if price is the determining factor," Sam Yip. of technology analysis firm Telsyte, said.

"With those trends happening, retailers like David Jones need to invest more in their online platforms, but at the same time give people reasons to come in-store.

"So significant improvements [are needed] in the in-store environment, at point-of-sale and with staffing to come through this trend with flying colours."

Mr Yip said not all consumers were price sensitive and that a fulfilling in-store experience was also a key selling point for some customers.

"There’s nothing wrong with selling something at full price, as long as you have the servicing and theatre and a reason for the consumer to come in-store," Mr Yip said.

"It’s wrong to say that online is taking over offline, because that would only be the case if price is the key and only ‘silver bullet’ for the industry. ... A place like David Jones needs to evolve and look beyond price."

Consumer confidence

Yesterday, retailers received a boost from the latest data on consumer confidence, which found sentiment had risen to its highest level in more than two years.

The Westpac-Melbourne Institute index of consumer sentiment soared to 108.3 in February, from 100.6 in January. Values above 100 indicate positivity rather than negativity.

But the Australian National Retailers Association (ANRA) described consumers as ‘‘fickle’’ and said ‘‘confidence rises have not necessarily corresponded with retail spend increases’’.

‘‘After the disappointment of the December figures and a 2012 annual growth rate just over 2 per cent retailers will not be holding their breath that confidence will equal spending in February,’’ ANRA chief executive Margy Osmond said.

59 comments

  • Perhaps they could use the space to reintroduce the once great Haberdashery department?

    Commenter
    no_subject
    Date and time
    February 14, 2013, 10:36AM
    • That's probably not a bad idea. As a mass merchant, DJ's is dead. Their ultimate competitive advantage will be to go back to their roots: providing unique, high-quality personal services you can't get anywhere else.

      Commenter
      Jimmy
      Location
      Not_Oz
      Date and time
      February 14, 2013, 3:30PM
  • It's not "low performing categories" they are exiting. They are merely exiting a sector where people are no longer paying stupidly high DJ's premium prices for commodity items.

    Queue the chorus of "piracy caused this", but really people, ANYWHERE is cheaper than David Jones on these sort of items.

    Commenter
    Alistair
    Date and time
    February 14, 2013, 10:37AM
    • Agreed. JBHiFi is in some cases $25 cheaper for a game.

      Commenter
      XIII
      Location
      Syd
      Date and time
      February 14, 2013, 10:44AM
    • Spot on, Alistair.

      Commenter
      Rob
      Location
      Sydney
      Date and time
      February 14, 2013, 10:46AM
    • Agreed. People have come to realize that they have so many more options available. As long as buying local is more expensive why not buy online and save money.
      With so many online sites offering so much more for so much less and with informational sites like zangle.com.au to help guide consumers on online purchases, unless DJs gets more competitive, unfortunately more departments will go soon.

      Commenter
      Lexi
      Location
      Sydney
      Date and time
      February 14, 2013, 10:47AM
    • Not just piracy; but on-line convenience.

      Why would anyone buy a CD for $25 when for $12 a month they can get a spotify account and gain unlimited access to any CD they can possibly think of?

      Why would anyone go down to the shops to buy a movie when they can buy it on Steam and play it an hour later?

      Now I'm just waiting for an equivalent of the above two for movies & TV shows..

      Commenter
      Sasha
      Location
      Sydney
      Date and time
      February 14, 2013, 10:54AM
    • If they keep exiting departments, the Eastern Suburbs Maven, DJ's core customer, will soon have to fend off the proles in stores like JB Hi Fi and Harvey Normal.

      Quelle horreur!

      Commenter
      David
      Location
      Sydney
      Date and time
      February 14, 2013, 10:55AM
    • Me too - you could shoot a gun through DJ's and Myers and there is no-one to hit - either staff or customers. If I want music or DVD's that is the last place I would look - the product is identical and there is no "service" to justify the higher price - I look for the cheapest offering - be it online or at Big W, JB's etc. I have found Bookworld good - yes it is an online retailer - but an Australian one - very competitive. Proves that it can be done locally.

      Commenter
      MST
      Date and time
      February 14, 2013, 11:04AM
    • @David: define 'maven'.

      Commenter
      frodo
      Date and time
      February 14, 2013, 11:12AM

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