25 August, 2017

John Dagge

Courtesy of the Herald Sun

 

DAVID Jones has called out high debt levels, rising mortgage costs and surging energy bills as key factors sapping consumer confidence after it unveiled a 25 per cent slide in full-year profit.

Net profit at the nation’s oldest department store chain came in at $127 million for the year to June, it said on Thursday.

The result was the slimmest since South Africa’s Woolworths Holdings bought the business in 2014 and was down from $170 million a year ago.

The retailer absorbed $31 million in costs linked to a restructure of its business, investment in a new food offering and moving its head office from Sydney to Melbourne.

“Despite record low interest rates, the Australian consumer is heavily indebted with recent regulations increasing mortgage costs,” Woolworths said in a statement.

“Consumer confidence remains below the baseline. ­Together with low wage growth, underemployment and increasing energy costs, disposable income and consumer confidence will remain under pressure.”

Total sales at David Jones rose 1 per cent to $2.21 billion but like-for-like sales, which strip out the impact of stores opening and closing, slid 0.8 per cent. The retailer’s gross profit margin slid 0.9 per cent due to aggressive sales activity across the sector.

Net profit at sister company Country Road Group, which takes in Country Road, Trenery, Witchery and Mimco, rose 1 per cent to $98 million while sales climbed 5.1 per cent.

It comes as David Jones ­increases its private label offering and moves to make gourmet food a key plank of its local sales strategy.

Woolworths Holdings chief Ian Moir on Thursday said the ­reaction to its new food hall at its Bondi store in Sydney had been better than expected and strengthened the group’s belief in food.

“Bondi has gone gangbusters,” Mr Moir said.

“You always get a whoosh when you open something new — but, boy, what a whoosh.”

Rival Myer is due to report its results for the past financial year on September 14. Shares in Myer on Thursday closed down 0.5c at an all-time low of 71c.