David Jones Limited: We knew it was bad, but not this bad

David Jones Limited (ASX: DJS) has reported like for like sales have slumped 11 per cent for the three months to October 29. Not surprisingly the shares are down 4 per cent to $2.85.

An 11 per cent fall in sales is quite alarming. We’ve long been warning about the retail sector’s death spiral, with Investment Analyst Dean Morel saying back in July “…while the death of DJs and many other retailers is not imminent, it is inevitable.”

Even yesterday we were warning about classic value traps, naming companies like Myer Holdings (ASX: MYR), Harvey Norman (ASX: HVN) and OneSteel (ASX: OST). Little did we know how quickly we might be able to add David Jones to that list.

David Jones’ chief executive David Zahra blames the “wealth effect” for their poor trading – volatility in sharemarkets, a weak housing market and employment uncertainty.

If nothing else, this and news from Woolworths Limited (ASX: WOW) of subdued trading all but locks in an interest rate cut in December.

David Jones are sticking to their knitting, targeting high-end consumers. We wish them luck, especially as these tough economic conditions are not going to turn around any time soon, and internet shopping is only going to grow and grow.

Even at what looks like an attractive valuation, we’re happy to pass on them, much preferring to invest our hard-earned money into growing companies, not ones facing secular headwinds.

If you are looking for a growth company trading at an attractive price, request a copy of our free report The Motley Fool’s Top Stock For 2012. Its shares have fallen 15 per cent in the past 6 weeks, but we’re not perturbed, especially as the fully franked dividend yield has snuck above 6 per cent. Click here to request your free report today, whilst it’s still free, and before it’s too late.

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