A deep sales slump at David Jones has underlined the tough conditions in the department store sector and sparked a prediction that lower prices will be needed to lure shoppers.
A trading update released by David Jones's South African-based owner, Woolworths Holdings, revealed sales at its Australian department stores declined 5.3 per cent in the past 20 weeks.
When measured on a comparable-store basis the fall was 5.2 per cent.
Woolworths pointed to its strategy to protect margins as one of the reasons that sales fell as it brought forward its end-of-season winter sale and reduced discounting throughout the period.
"Key concession brands also reduced tactical campaign activity in David Jones to reduce discounting," it said in a statement.
The company also blamed disruption due to refurbishments of the Bondi Junction Food Hall and the Sydney CBD Elizabeth Street store and the introduction of a new inventory management system for the lower trade.
The company said the last six weeks had shown an "improving trend".
Deutsche Bank analyst Michael Simotas said the trading update was "very weak" and suggested the embattled Myer chain might have performed better than its key rival.
"Clearly the weak sales from DJs had a company-specific element to it, with the company changing inventory systems and seemingly steering away from discounting, despite Myer's unsuccessful experience with this previously," he said.
"However, given weak sales from both department store operators, it is clear the format is challenged and we continue to believe that growing sales without sacrificing margins will be difficult to achieve."
A slightly brighter result for Woolworths was the Country Road Group, whose sales increased 8.3 per cent at a headline level although comparable-stores sales (which exclude Politix stores acquired in November 2016) declined 0.4 per cent.
"We opened eight new Politix locations within David Jones stores and are seeing positive results from this initiative," the company said.
