David Jones revenue suggests Myer is no longer a rival

By Sarah Falson

SYDNEY: Narta member David Jones announced today that its profits after tax for the half-year ending 27 January 2007 have soared 30.4 per cent, partly due to lessened competition from Myer.

Myer loosened its competitive grip on rival department store David Jones – also the second-largest department store in Australia after the Coles Group – when Myer was sold by Coles to Texas Pacific Group last year for $1.4 billion, simultaneously reducing its stock discounting.

“They have been able to extract better selling prices because of the lack of competition from Myer,” Tony Pearce of Australian equities at Legg Mason Asset Management in Melbourne told the media.

David Jones CEO, Mark McInnes, agrees, stating that since Myer was sold, David Jones was able to more closely examine its business practices.

“New ownership of Myer has resulted in more rational decision making than was previously the case. We expect medium to long term benefits to continue to flow through to shareholders from industry restructure,” he said.

The company’s total profit after tax amounted to $71.1 million compared with $54.4 million in the same period the previous year, supporting McInnes’s claim that David Jones has a “strong business model in place”.

Three new David Jones stores will be opened before the end of the year, including Victoria’s Burwood in May, Queensland’s Chermside in August and Brisbane’s Queens Plaza in February next year, providing a “strong platform for revenue growth”.

The company is in talks with undisclosed banks to launch a David Jones-branded general purpose credit card, which may be released next year.

Earnings generated from David Jones department stores alone amounted to $93.3 million compared with $64.8 million in the corresponding period, with another $17.9 million generated from “financial services”.

All profits matched the company’s January 16 forecast.

The company will continue its track record of tight stock management while its inventory levels were flat on last year, meaning the group has experienced strong sales and productivity.

The outlook for the second half of the year seems strong with an estimated 13.5 per cent growth after tax, due to an estimated positive environment for consumer spending this year.

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