Department store David Jones has confirmed a 13.5 per cent drop in profit after tax for the first half of fiscal 2013, citing “challenging trading conditions”.
Profit after tax (PAT) for the retailer was $73.5 million for the half year ended January 26 2013, compared to $85.0 million in the previous corresponding period.
Sales also declined throughout this half, 0.7 per cent to $1,003.8 million, compared to $1,011.2 million last year.
The Fashion and Beauty categories delivered sales growth during the half, however, this was offset by a significant decline in Home categories, in particular Electronics which continued to be “challenging and subject to ongoing deflationary pressure”.
Commenting on the lacklustre figures, David Jones said the results reflect the ongoing challenging trading environment and the company’s strategy to improve the profitability of sales by reducing the duration, quantum and depth of its discounting events.
The strategy, unveiled in the company's 'Future Strategic Direction Plan' last year, is based on the keystones of a transformation towards omni channel retailing, cost price harmonisation, and improved customer service and engagement.
To date, David Jones said it has made “significant progress” during the half, implementing its transformation in line with the timetable communicated to the market last year, including the launch of its new webstore in November 2012.
The retailer also reported that the webstore achieved a 288 per cent increase in sales on the prior corresponding period during the second quarter of 2013.
Visitor numbers also more than doubled to 5.4 million visits and average order size was approximately three times the value of the average in-store transaction size.
Going forward, the company has indicated that introducing new functionality to its site, including ‘click & collect’, incremental delivery options and social commerce will be a key focus over the next 12 months.
The company said that cost harmonisation will also continue as a priority for the business, as it continues to progress its discussions with suppliers with the aim of delivering retail price reductions to customers.
The company also confirmed it has a “detailed Cost Price Harmonisation work program” in place to address this issue, with approximately 250 international brands in the business already identified which require price harmonisation going forward.
The company revealed it is in discussions with the majority of these brands, being those that are the largest in terms of sales. Of these brands, 50 per cent have commenced harmonising prices.
David Jones also reported a 17 per cent decrease in customer service complaints over the period due to an increased floor staff hours relative to sales.
Over the next five years the company has also flagged six store leases set to expire in “less robust demographic locations” with David Jones set to review its existing store portfolio progressively during this time.
In a move to improve the productivity of its stores, David Jones also revealed it will look to increase the proportion of selling space compared to Gross Lettable Area (GLA) from 76 per cent to 85 per cent across its store portfolio with a larger percentage of this space dedicated to the Fashion and Beauty categories.
Commenting on the company's fall from grace, David Jones CEO Paul Zahra said he is confident the situation will improve.
“Our 1H13 profit after tax has been impacted by ongoing investment in implementing our 'Future Strategic Direction Plan' as well as by challenging retail conditions,” he said.
“Our focus going forward is on improving our sales, margin and labour productivity per square metre. We are confident the investment we are making will provide us with a strong sustainable business capable of addressing the retail structural changes currently taking place and positioning us for long term success.”