Retail cheer graces Australian stocks with rising department store sales

The Australian share market had an upswing on Monday with a positive trading session for Australia's S&P/ASX 200, up 0.3 per cent and led by the consumer staples sector. The cluster managed to get a positive trading session in similar circumstances on Nov. 20, Friday, too.

Retail uptick

CMC Markets chief market analyst Ric Spooner said the buying momentum seen on Friday was sustained on Monday.

“We have seen support for, or bargain-hunting, in the big non-mining-type stocks,” he said.

Monday got a lead from overseas markets and buyers continued their acquisition, Spooner said and noted that the strong support for supermarket player Woolworths was the key highlight.

Woolworths was high at $24.63 up by 92 cents, or 3.88 per cent after speculation that it will offload shares of the Big W variety store chain. Wesfarmers, owning supermarket Coles, also saw its stock soaring 41 cents to $39.42.

Spooner credited the cheer in retail to the solid sales results from department stores, released in the third week of November, ably backed by many positive consumer sentiment surveys. They added the desired boost to the retail sector ahead of Christmas.

Department store chain Myer was also up by four cents at $1.07, on the back of its better-than-expected quarterly sales results. Though David Jones owned by Woolworths Holdings and Myer had stock clearance drives at the back end, they seemed to be in sync with the improvement typical of post-Global Financial Currency recoveries, Spooner noted.

According to the analyst, the improvement in department store sales marks an improvement in consumer sentiment indices and positive trends in the job market. A report in the Australian, profiled the growth of up-market department store chain David Jones, taken over by Woolworths Holdings in 2014. It has recorded the strongest sales growth in more than 15 years and remains the silver lining in the otherwise gloomy retail sector.

Management change

After its takeover by Woolworths Holdings, David Jones accelerated the earnings momentum. According to a trading update in Johannesburg, for the 20 weeks that ended on November 15, the department store was able to increase sales by 12.2 per cent in Australian dollar terms.

What is significant is that sales at David Jones are growing 10 times faster than its rival Myer. Analysts hail the double-digit sales surge as the best performance point by David Jones since 2000.

In 2014, Woolworths Holdings paid $2.1 billion to buy the two century year old David Jones retail chain. Under the South African ownership David Jones soared ahead with a 28.8 per cent jump in operating profit to $161 million for the 11 months until June 30. Incidentally, that was David Jones’ first jump into profit growth zone since 2010.

Rival of David Jones, Myer is also in a costly restructuring mode led by chief executive Richard Umbers. It recently posted full-year sales growth of 1.7 per cent for 2015.

In retail, David Jones stands out like a beacon, distinct from rest of the crowd where sales are sluggish as consumers are preferring to save than spend.

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