DJ’s stock price dive – is Julia to blame?
by Peter Switzer
The David Jones warning yesterday that its mid-year sales were shocking and that the second half profit was nosediving resulted in a fair bit of finger-pointing, but the real culprits got off scot-free.
And the market wasn’t happy either with the share price tumbling 18 per cent, taking $370 million off the value of the company.
When the news broke, the first group to be bagged was the board of David Jones but soon the new CEO of the company, Paul Zahra, started finger-pointing and his target was the Prime Minister. As if she didn’t have enough enemies at the moment, with her carbon tax tour not really looking like it’s making a real lot of friends and influencing people.
Zahra’s argument in a nutshell is that in the history of DJs it doesn’t look like they have seen such a big fall away of customers! However, apparently 20 years ago there was a similar slump but that was the recession we had to have.
He inferred his clientele tend to be well-heeled and the run of government news has not helped.
Apart from natural disasters such as floods, there has been carbon tax talk, mining tax threats and flood levies and none of this has helped.
More to blame
Now as someone who never likes to let politicians off the hook, on principle, I would argue that Mr Zahra should have widened his spray gun.
A lot of Aussies are spooked and are not spending because of the RBA’s interest rate policy. The Bank has raised rates too quickly and then the accessories after the fact were the banking economists who have been predicting two to three interest rate rises this year. This has curtailed interest in property, boosted saving and hit retail spending.
Another problem for retail has been the high dollar, which has meant many DJs customers are now spending overseas when they go on holidays.
Throw in the debt worries around the world, which have hurt stock markets, and once again higher income shoppers would be feeling a little threatened and that would have hit DJs.
Then there’s the online challenge as well, which while still small, is growing.
So certainly Mr Zahra has good reason to look for excuses and can reasonably ask, why would you try a carbon tax now when a large chunk of the Aussie economy feels beaten up?
By the way, DJs have to look at themselves as well and as there’s no apparent online strategy I have come across. Of course, if they do have one and I don’t know about it, well that would say something about the retailer’s marketing. (I have since been told they do have an online shop, but I wasn’t told by David Jones, I was told by my sub-editor!)
I only hope we see a low inflation figure at the end of this month as it might seriously encourage the Reserve Bank to think about a rate cut. While I think the stock market will improve as the year proceeds, I think consumers need a bigger shot in the arm to help DJs and all of the other retailers out there who are victims of the China boom and some pretty ordinary actions from those in charge of public policy.
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Published on: Friday, July 15, 2011
The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer and Paul Rickard the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.