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Why David Jones is not expecting a merry Christmas

DAVID JONES is expecting sales will remain flat during the all-important Christmas season with the departing chairman, Bob Savage, telling shareholders on Friday that consumer sentiment remains subdued despite recent interest rate cuts.

''We have planned for a flat result given we've got deflation of around 2 per cent, we have to work hard to stay still is probably the best way to describe it,'' the David Jones chief executive, Paul Zahra, said after its shareholder meeting.

As with this time last year, consumer sentiment remains the biggest drag on the company's performance, Mr Zahra said.

''It is something that I have no control over and it's the biggest challenge,'' he said.

His departing chairman concurred. ''The management team can go off and execute everything in the strategy brilliantly and if consumer sentiment doesn't change the results will be good but not exceptional,'' Mr Savage said. ''So the reward for their effort is going to be heavily dependent on what's happening in the economy, heavily dependent.''

Some shareholders also raised the disappointing service in the company's stores as another reason for the department store's weak performance. ''I suggest your profitability is down due to a total and utter lack of customer service in your shops,'' one shareholder told the meeting.


Many more expressed the same sentiment.

Mr Savage defended staffing levels which had been increased relative to sales last year after the company admitted it had cut too heavily in this area.

He promised further improvements to service when new point-of-sales systems were installed across its stores, cutting transaction times in half.

The company has just started the rollout of the new system - which is also an important plank for linking its online and in-store operations - and plans to complete the installation across all stores by July next year.

Price deflation is potentially another big issue for the company, but only if it can convince suppliers to lower prices to levels that are competitive with what rivals charge for the same product internationally.

''The issue of price harmonisation will take some time to work its way through all the products in the store,'' Mr Savage said.

But he admitted that ''only a small percentage of items'' had been successfully harmonised in this way.

Investors were told that some suppliers are experimenting with price cuts to see what the effect was on sales while others continued to milk higher margins from Australian shoppers.

David Jones announced on Thursday that Mr Savage will step down at the end of this year to be replaced by fellow board member Peter Mason.

''While it is always difficult for a chairman to choose an ideal time to retire, I believe the company is in an excellent position to deliver on its strategy with a stable management team and experienced directors to provide the company with valuable oversight and direction,'' he told investors at the meeting.