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Myer, David Jones: why big retailers are struggling

Myer is facing tough times
Myer is facing tough times

CHRISTMAS can be a stressful time. But this one will be especially tough for the executives of Australia's big department stores.

Christmas 2017 is going to be make or break. If it goes badly, department stores might find their slow decline turns into a downward spiral.

Australian retail spending is soft across all categories, but of the major categories the ABS reports on it is department stores that are doing worst. This next chart shows that since 2009 sales have drifted backwards, not keeping up with economic growth, inflation or population growth.

The grand old business model that gave the world names like Harrods - as well as our Myer and David Jones - might not fit with the modern world.

BLEEDING

David Jones' preliminary audited results for the last year were a litany of bad news for people who like department stores. Profit fell sharply as revenue went backwards. But David Jones seems to have a plan.

David Jones department stores have long included "food halls."

Food is an area where Aussies are spending more money, so David Jones is investing in boutique convenience stores that will sell fancy foods to posh people. To the extent this means they're moving away from being a department store, it might yet save them.

Myer results came out today. We knew already they are going to be a murder scene and they delivered, with revenue falling 2.7 per cent and profit going to shareholders down by 80 per cent.

Myer had already sheepishly admitted to investors its results would not be as good as expected. It announced in July that its investment in Topshop was a multimillion-dollar write off and that its brand Sass and Bide was not worth as much as previously.

The Myer stock price is half its recent peak as investors prepare themselves for the worst.

Jason Murphy is an economist. He publishes the blog Thomas The Thinkengine. Follow Jason on Twitter @Jasemurphy

Topics:  david jones myer

News Corp Australia


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