Launched on Tuesday, the sales come at a time of unprecedented pressure for both businesses and will be crucial to delivering a strong fourth quarter performance after a financial year marred by impairments and leadership changes.
Both department stores have slashed up to 70 per cent off thousands of products in the mad scramble for consumer wallets, hoping to clear slow moving winter stock.
Myer has launched with a series of two-day offers, including 40 per cent off Bonds, Piper, Reserve and its own Blaq brand, while DJs has taken 30 – 50 per cent off a wide range of fashion, including Camilla and Marc, Rachel Gilbert and Tigerlily.
Slow moving winter stock appears to be a priority for both businesses after a tough March, with DJs expecting to clear 10,000 coats and Myer placing a deal for a $129 winter jacket on the front page of its catalogue.
Myer executive chairman Garry Hounsell warned earlier this month that Myer’s fourth quarter profits might be impacted by an inability to move winter stock, an admission that sent shivers through the market.
Despite the backdrop, Myer’s general manager of stores in NSW/ACT Brett Dyson told reporters on Tuesday that it was business as usual for the department store, with a similar level of discounting as last year.
“The Myer stocktake sale is part of the Australian tradition and forms a huge part of our promotional activity at this time of the year,” he said.
But with unprecedented levels of pressure on Myer to deliver a strong fourth quarter and new chief John King about to start, the stakes are relatively high.
Share prices have almost halved from this time last year and major shareholder Premier Investments, whose chairman Solomon Lew accused Myer of engaging in “extreme discounting” in recent months, will be keeping a close eye on the sales.
Likewise, with DJs South African parent Woolworths Holdings recently showing Australian boss John Dixon the door, pressure is mounting on the up-market department store’s chief David Thomas to deliver.
DJS operating profit fell 37.7 per cent to $66 million in the six months ended 31 December, while comparable sales were down 3.3 per cent.
Managing director of clothing and general merchandise, David Collins, said on Tuesday that there would be “incredible markdowns” available for customers in June.
“We expect to welcome more than two million customers into stores nationwide and over three and a half million visitors to our website throughout the Half Yearly Clearance,” he said.
The two department stores appear to be matching each other on a range of discounts, including swiping 70 per cent off Circulon cookware.
Other speciality retailers are expected to follow suit with their own stocktake sales in the coming weeks now that the major department stores have shown their hand.
But there is concern that given extended promotions in March destructive discounting will be rampant, putting further pressure on margins heading into fiscal 19.
Increased competition could leave ragtraders heavy on stock moving into the transition months of August and September, leading to the same type of “mid season” sales seen last year.
In 2017 consistent promotions through to the holidays put significant pressure on already disrupted fashion businesses, some of which have since collapsed.
General Pants Co. chief executive Craig King told Inside Retail earlier this month that concern was building that there was too much stock in the market.
“Retailers are challenging with managing their inventory effectively, and suppliers and brands need to check themselves as to their expectations with how much product can be pushed,” he said.
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