David Jones has blamed the ‘wealth effect’ for why it has taken a steep beating this first quarter.

The high-end department store reported total sales revenue declined 11.2 per cent to $414.3 million compared to last quarter’s $466.6 million. On a like-for-like basis sales revenue is down 11 per cent.

David Jones CEO Paul Zahra said the trading performance was in guidance to what was provided at the time of its full year results in September, reiterating this quarter is relative to what it cycled during a strong sales quarter last year of 3.2 per cent.

“The challenging conditions we faced in 4Q11 continued in 1Q12. Despite this being below our original expectations in July it is consistent with our comments to the market in August and September at the time of our 4Q11 Sales and FY11

“Results announcements when we reaffirmed our 1H12 PAT Growth Guidance of -15% to -20% (based on our expectation that sales in 2Q12, whilst still negative will improve from 1Q12). Whilst trading improved in October and November 2011, it continues to be negative on last year.

“In addition, our customer base has been hardest hit by the wealth effect including factors such as volatility in the equity markets, the weak housing market in particular at the top end, employment uncertainty in certain white collar professional sectors and uncertainty surrounding Europe's sovereign debt crisis resulting in consumer sentiment weakening and household savings increasing.”

Testament to David Jones' core customer base having been adversely impacted by the wealth effect is the fact that the company's stores located in the best demographic areas saw the most marked decline in trading.

The company also said foot traffic and basket size were down in all stores, highlighting that sales downturn was felt across all categories, particularly in its Home Entertainment and Electricals category.