David Jones forecasts up to 30% profit over first half 2006/7

By Sarah Falson

MELBOURNE: David Jones Limited today announced an expected profit increase of 25 to 30 per cent for the first half of FY2007 over the same period last year, compared with an 8.5 to 13.5 per cent increase for the whole of FY2007 suggested previously.

“Sales in all categories exceeded expectations and we are delighted with the performance of all our stores,” said David Jones CEO, Mark McInnes.

“The strength of our business model over the long term is to capitalise in times of buoyant consumer spending, as our outstanding sales performance to date in 1H07 demonstrates. Equally, our business model is designed to enhance financial disciplines in times of a slowdown in consumer spending, as we experienced in 1H06.”

Due to a better-than-expected Christmas and clearance trading period over the past two months, sales for the second quarter of 2007 are expected to reach eight or nine per cent higher than the same period last year, and similarly sales for the first half of 2007 are expected to grow 7.2 to 7.8 per cent on the first half of 2006.

McInnes says his company expects to receive higher profits this year than the high precedent it set last year, especially for the fourth quarter. 

“We are cycling a high base of 4.4% sales growth in 2H06, and importantly, 5.4% sales growth in 4Q06, which is the key trading period for the half,” he said.

However, expected trading and profit figures for the whole of 2007 have not yet been updated since the previous bout of forecasts, and are expected to be released at the Half Year Results announcement in March, along with the final gross profit and costs positions.

“As a trading business we prefer to trade through 2H07 before updating our existing guidance of sales growth of 0% – 1% and underlying PAT growth of 8.5% – 13.5% in the second half of FY07,” said McInnes.

David Jones share prices on the Australian Stock Exchange have soared as a result of the company’s announcement today. At 4pm the company’s shares were up 29 cents, or seven per cent since yesterday, compared with Harvey Norman, up four cents, JB Hi-Fi, up seven cents, and GUD Holdings — Sunbeam’s parent-company — up 25 cents.

In November last year, McInnes made a statement forecasting a favourable Christmas sales period.

"The company is well prepared as the leading gift giving destination for the important Christmas trading period," he said.

"Management is confident that the company’s strong business model positions it well to continue delivering its previously stated guidance of five to 10 per cent underlying profit after tax growth in both 2006/07 and 2007/08."