David Jones bullish on Christmas sales

Department store owner David Jones Ltd says it remains very positive about the
all-important Christmas trading season, thanks to rising sales and an upmarket
customer base.

Chief executive Mark McInnes said the retailer was cautiously confident heading into
the Christmas trading period, which generates between 60 to 70 per cent of first
half profit.
"All signs are that things are improving and there is a bias toward the upside but
the macro environment is still very fragile," Mr McInnes told reporters after the
company's annual meeting on Monday.
"We don't expect it to be any more competitive over Christmas than it's normally been."
He said customers were no longer trading down as they were in late 2008 and David
Jones would not be discounting merchandise to draw customers into its stores.
"We've seen almost the polar opposite customer behaviour - customers buying for
fashion, customers buying for want not need," he said.
"Last year you almost had to have a price point on everything to clear it."
Mr McInnes said that rival Myer Ltd's share market listing has delivered a "net
positive" for David Jones by differentiating the two companies customer bases and
growth strategies.
"Their strategy of opening regional, low demographic stores versus our strategy of
opening medium to high demographic stores actually sets us apart," Mr McInnes said.
"Our growth strategies are entirely different. We think that will be to the
long-term benefit of our shareholders."
Mr McInnes, like many other retail chiefs, also expressed a preference for the
Reserve Bank of Australia to keep the cash rate steady when it held its monthly
board meeting on Tuesday.
He said David Jones' customers were generally less sensitive to interest rate rises,
but its sales did demand dampen slightly after the November rate rise.
The company on Monday declined to update its sales and profit guidance for its
fiscal 2010 until after the Christmas period, but told shareholders it was well
positioned to continue expanding gross margins beyond the five basis points it
achieved in fiscal 2009.
Sales will also be boosted from the Melbourne central city store's refurbishment,
which partly reopened its ground floor last Saturday and delivered store-wide sales
far in excess of expectations.
Once fully refurbished, the store would have 30 per cent more sales space and
deliver 30 per cent more sales than in December 2008, Mr McInnes said.
The full benefit of the increased sales to the company will be seen in the third and
fourth quarter of its fiscal 2010.
David Jones' has also entered into agreements to open four new stores in NSW,
Queensland and Western Australia under its four-year, $400 million growth program.
The retailer is also in negotiations to open another four stores.
The new stores, refurbishment of the Melbourne CBD store and rebuilds of existing
stores will deliver sales growth of between 15 and 25 per cent over the medium term.
The growth program was fully funded and no additional debt funding was required, Mr
McInnes said.