'Dramatic' sales drop for top Australian retailer

Shares in prestigious Australian department store David Jones plunged more than 18 percent Thursday after the high-end retailer warned of a profit slump due to sluggish sales. David Jones said trading conditions "deteriorated significantly", and warned results would show sales dived 11 percent in April-June, the final quarter of fiscal 2010. It added that profit in the final six months of the year -- January-June -- would be about 20 percent lower than the same period in 2010. Full-year profit would be between 0.5 percent and two percent lower than the year to June 2010, at around Aus$167.7 million-Aus$169.7 million (US$180.6 million-US$182.8 million), the company said. "The dramatic and rapid deterioration in trading conditions in 4Q11 has been unprecedented," said David Jones CEO Paul Zahra. "As a result we are taking a cautious approach to 1H12 and have planned and forecast trading conditions to continue to be challenging, with expected negative sales," he added. The company's stock went into freefall on the news, diving 18.16 percent to $3.20. Rival department store Myer also backtracked, losing 6.42 percent to $2.48. Consumer sentiment has dropped off sharply, with the latest survey showing an 8.3 percent plunge in confidence in July to levels usually associated with a recession and last seen during the depths of the global financial crisis. National incomes are surging and the Australian dollar is strong due to an Asia-driven mining boom, but growth is uneven and interest rates remain at a relatively high 4.75 percent. Debt fears in Europe are also dampening confidence, along with cost of living worries associated with Canberra's new pollution tax on Australia's top 500 carbon emitters, despite promises of household compensation.