David Jones sales rise for first time in two years

Struggling department store retailer, David Jones Limited (ASX: DJS) has reported its first increase in quarterly sales in two years.

Sales rose 0.3% in the October quarter to $415.6 million, on the back of a shifting focus to new season stock and cutting back the company’s October clearance sale from six weeks to four.

Chief executive, Paul Zahra said that the company is seeing a continued improvement in sales tracking quarter on quarter, adding that trading in the first couple of weeks of the December quarter was tracking broadly in line with October’s.

Despite the rise in sales, analysts had been expecting DJs to report sales growth of around 1%, in line with competitor Myer Holdings Limited (ASX: MYR). Last week, Myer reported a 1% rise in sales to $688 million for the thirteen weeks to the end of October 2012, although same-store-sales were up 0.8%.

Both Mr Zahra and Myer chief, Bernie Brookes said that they remained cautious about the trading environment, and were looking forward to the busiest time of the year, leading up to Christmas and the stocktake trading in the new year. Mr Zahra said the retailer was preparing for a flat Christmas (compared to last year), while hoping that it would be better than that.

David Jones reported that homewares and electrical categories continued to be challenging, which may be a guide to how JB Hi-Fi Limited (ASX: JBH) sales are trending. Harvey Norman Holdings Limited (ASX: HVN) recently reported that technology and entertainment sales continue to be affected by the cautious consumer and continued price deflation.

The Foolish bottom line

While David Jones is certainly not out of the woods yet, a rise in sales for the first time in two years suggests the company is on the right track. A modest rise in consumer sentiment coinciding with improved weather conditions and less aggressive discounting led to improved trading conditions for most retailers in the October quarter. Traditional bricks-and-mortar stores will be hoping for more fine weather and a rate cut by the RBA next month to spur sales higher.

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Motley Fool writer/analyst Mike King owns shares in David Jones and JB Hi-Fi. The Motley Fool’s purpose is to help the world invest, better. Take Stock is The Motley Fool’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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