The retail business in Australia is a tough place to be right now… There are a few factors for it. With the AUD being so high, Aussies are taking off overseas to catch a bargain, people are turning to the internet for their shopping needs and we are hanging onto our hard-earned dollars… perhaps for a rainy day as the saying goes.
Two of our prolific department stores are finding the ‘current regime’ tough.
Myer and David Jones, both who have a celebrated history have been troubled for a while now, mainly due to consumers turning to the internet making their purchases overseas, which are at a more favoured cost.
It has been reported that Myer are set to close four stores over the next five years and plan on investing $A30 million on improving its online business. The department store hope that in the next three to five years that 10 per cent of their overall revenue will come from online sales.
Sales from online shopping have doubled during the past 12 months are “growing at an exponential rate,” Myer CEO Bernie Brookes said in an interview this week. Earlier this month, Myer reported a 14 per cent decline in net income for the year ended July 28. But Myer are looking on the positive side, announcing their look to invest substantially in their online business.
“There’s no doubt that it is an environment that we’re playing a little bit of catch-up but we’re starting to get into the game in a big way,” Brookes said. While none of the company’s stores are losing money, he said, “what we are doing is looking forward and saying if the internet is 10 per cent of our business then naturally some of those stores that are marginal might go under water.” At present, online sales only represent 1 per cent of the store’s overall revenue.
David Jones seem to be worse off than their rival, Myer and are looking to sell off some of their properties in Sydney and Melbourne after posting a 40 per cent plunge in full year profit.
Reporting their financials this week, David Jones made a net profit of $A101.million in the year to July 28, down from $A168.1 million the previous year. Sales declined by 4.8 per cent from the previous year to $A1.87 billion and costs have risen, the company said.
The department store have bought on an independent property consultant to look at the sale of its four stores in Sydney and Melbourne CBD’s. News.com.au reports that the potential worth of the properties was $A612 million.
“We are confident that the investment we are making in our business and in the implementation of our strategy will position us well for long term success in the current changing retail landscape,” David Jones CEO Paul Zahra said.
“We are also committed to further evaluating and analysing the development potential of our property portfolio to enable us to unlock additional value for shareholders.”
It would be a shame to see either of these Australian icons disappear and we don’t believe that to be the case, yet the bricks and mortar look, feel and number of stores of the two department stores we see now will have a drastic change over the next 5-10 years…We believe a reduced number of stores, a real focus on their product offer, service delivery and the dynamic nature of how you shop with the brands will be their formula.
By Cassandra Murnieks
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