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Rates rise hurting David Jones -

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Rates rise hurting David Jones

The World Today - Thursday, 8 May , 2008 12:19:00

Reporter: Brigid Glanville

ELEANOR HALL: Rising interest rates aren't just hitting home owners. The high-end department store
David Jones is also feeling the pinch.

For the three months to the end of April, the company's total turnover increased by just 3.8 per
cent.

And the company is predicting that by next year that could be at zero.

Brigid Glanville has been at a media briefing with the company and she joins us now.

So Brigid, what did David Jones executives say about these latest figures?

BRIGID GLANVILLE: Eleanor, Mark McInnes, the chief executive, said that rising interest rates and
the slowdown in the economy has affected sales growth. He did say that they were expecting this.

He then went on to say that the big ticket items, such as furniture, electrical and homewares were
hardest hit, however, he did say that sales in televisions, in plasmas and LCDs had gone up. Maybe
that's because people aren't going out as much, they're at home watching television.

He also then went on to say that sales in womenswear, cosmetics and menswear had gone up, and it
was particularly helped by the cold weather. There's been an increase in coats and boots and
dressing gowns.

He then went on to say that furniture certainly wasn't doing well, and it was all about, he said in
this media briefing, it was about interest rates and how people have been affected, and Mark
McInnes this morning said that that slowdown is all about a drop in consumer confidence.

MARK MCINNES: I think it's kind of like bad news, and people just not knowing where the bad news is
going to end, as opposed to an underlying wealth perspective.

Interest rates rise in August, November, February, that was the rise, but it combined with a
collapse of the financial services sector, if you like. But on the other hand, everyone's got a
job, you know, housing occupancy is at 99 per cent right around the country, and the minerals and
commodity prices are booming.

So what we really think is that people just want to see the end of the bad news before they get
back to their normal shopping patterns, and that's exactly what we see.

ELEANOR HALL: And that's the CEO of David Jones Mark McInnes.

And Brigid, he's saying things will get worse, though, not better?

BRIGID GLANVILLE: He is, Eleanor, and what was also interesting, just following on from what Mark
McInnes said then about the mining boom, the West Australian stores have been doing particularly
well, and Queensland, and he said this is the first time they've seen a drop in that sales growth
in the WA stores, which was quite interesting.

But he did say that next year, they're expecting sales growth to be down to zero to one per cent.
Now, it should be noted that the company isn't seeing decline in growth, just a slowdown. However,
it's still significant, because since 2005, David Jones has done very well, it's been very buoyant.
For example, its sales growth in July last year peaked at nine per cent, so that's a big difference
from today's 3.8 per cent results that's just announced.

ELEANOR HALL: So is this likely to be a bad sign for other retailers too?

BRIGID GLANVILLE: As David Jones is at the top end of the retail market, you would expect it would
be bad news, because traditionally, when interest rates rise, those people on a lower income are
hardest hit, because they spend a greater proportion of their income on petrol, food and housing
costs. So stores such as Kmart, Target, Big W, which aren't in the high-end market, you would
expect to be hit.

However, JB Hi-Fi, which isn't a top-end store, that sells mainly small electronic goods such as
CDs, DVDs, computer games, a few televisions and iPods, things like that - they actually came out
yesterday and said that it expects its 12-month profit to be at the top end of the forecast, and
that JB Hi-Fi is expecting sales to rise about 40 per cent. So that's in contrast to David Jones.

ELEANOR HALL: So now what's been the reaction on the sharemarket to this result from David Jones
this morning?

BRIGID GLANVILLE: Retail stocks have been down on the sharemarket. This morning, just after opening
at 10 o'clock David Jones was down nearly two per cent. At midday, eastern time, David Jones' share
price was down half a per cent to $3.58.

ELEANOR HALL: Brigid Glanville, thank you.