Department store closures after the 3rd year of failed sales

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The main department store chain David Jones has recorded a third consecutive year of sales contraction, the company has announced a commercial update, with a small signal that the cut in interest rates has encouraged consumer spending.

The David Jones and the Country Road Group, purchased by South African retailer Woolworths Holdings in 2014 for $ 2.2 billion, have plans to close the shops and downsizing floorpace to lean on the recent success of online shopping.

Online sales increased by 46.6% and now represent 7.7% of total sales between 52 weeks and 24 June.

David Jones like-for-like sales were 0.1 percent lower, and total sales were down 0.8 percent.

The Country Road business, which includes Mimco, Witchery, Trenery and Politix, recorded a loss of sales in the same store by 0.6 percent as the company reduced the paving space by 2.9 percent for the division.

"With the increase in the contribution of online sales, the reduction of non-productive space remains a priority," the company said in a commercial update.

David Jones is downsizing his Sydney flagship store from two 17-storey sites in an 11-story store and a gourmet mezzanine, closing its branch on Market Street and squeezing it in the only location on Elizabeth Street.

Natural light will flow from huge windows onto an area that the company has dubbed "shoe heaven". Above the shoes, in an area that was once the headquarters for executives, will be a mezzanine floor with a champagne bar boasting stunning views of Hyde Park.

But this transformation is costing David Jones in the short term, as the country struggles through a "retail recession".

"Australia's retail trade conditions remain difficult," the company said.

"David Jones was also significantly influenced by sales interruptions resulting from the renovation of Elizabeth Street stores, which should be completed by the third quarter of the 2020 financial year.

"In Country Road Group, while sales growth in the second half of the year was influenced by commercial conditions, online sales in Australasia grew by 12.9%, representing 20.3% of sales."

Just like the smaller convenience store style that Woolworths and Coles have opened, David Jones has focused on smaller spaces in his new stores to modernize the shopping experience.

The miniature department store of the Barangaroo in Sydney inaugurated at the end of 2016 was the first of this fleet, with the South African property chain favoring a layout of 1400 square meters on two floors: one tenth of the size of the chain's department store.

This model allows David Jones and Myer to offer a more accurate range of products to meet local demographic needs than to try to meet the needs of a larger market, sales expert said at news.com.au retail of the Queensland University of Technology Gary Mortimer.

The DGC Advisory retail analyst Geoff Dart said that in the beginning of the year the downsizing and modification of in-store brands to increase profit margins would not work because younger consumers saw no relevance in the brand.

"That's why profits have fallen every year for 15 or 16 years. Revenue does not grow and this can only get worse," he said.

"It's a brand problem, it's like Coca-Cola tries to say they're healthy."

Continue the conversation on Twitter @James_P_Hall or james.hall1@news.com.au

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