Never mind what the OECD thinks, Australia’s leading department store chain is readying itself for a bigger retailing slump than the 1990-91 recession.
This morning David Jones issued the gloomiest forecasts yet from a leading company about 2009. They indicate that the high-end retailer doesn’t believe forecasts that Australia will remain out of recession.
The Organisation for Economic Co-Operation and development forecast a 1.7% rise in Australia’s GDP next year, a figure based on information from Federal Treasury, the Reserve Bank and other sources.
But in its first quarter sales update, released this morning, David Jones said it had set its business plan for the rest of 2008-09 on the assumption that the slide in sales is worse than was experienced during the last recession ‘we had to have’. That was after same store dropped more than 6% in the first quarter.
David Jones statement came a day after Harvey Norman revealed as 32% drop in first quarter earnings because of slumping sales here, in New Zealand, Ireland and Singapore and Premier Group said its Just group acquisition had experienced a drop in same store sales amid the worst retailing conditions its chairman, Solomon Lew, has seen in his 45 years in the business.
DJs said first half like for like sales fell 6.1% from the same quarter of the previous year, but the company remained on track for a 5%-10% lift in earnings in the first half. Sales were down 6.3% on a topline basis, unadjusted for different store numbers.
It said the drop was smaller when adjusted for sales disruptions at its Bourke Street store in Melbourne and in stores in Sydney and on the Gold Coast: the drop was down around 4.3%.
Total sales for the three months ended October 25 fell to $442.3 million, from $471.9 million in previous corresponding period.
But then the company surprised with this warning:
“The Company has planned for LFL Sales to be –7.5% for each of the next 3 quarters of FY09 (which is worse than was experienced in the 1990/91 recession).
“On this basis the Company reaffirms its guidance of 5-10% PAT growth in FY09.
“We have set our trading budgets for FY09 at worse than the experience of the department store sector in 1990/91, where the market experienced four negative quarters ranging from –3% to –6% per quarter.”