David Jones profits fall but retailer sticks by “strategic direction plan”

By Claire Reilly

David Jones today reported its results for the half-year ended 26 January 2013, with the department store posting a minimal decline in sales of 0.7 per cent, and a significantly larger drop in profits after tax of 13.5 per cent.

Sales for the half year were listed as $1 billion, while profits came in at $73.5 million and earnings before interest and tax were listed as $109.1 million – a 13.3 per cent decline from the first half of 2012 when the company saw earnings of $125.8 million.

One of the categories called out in the company’s results report, submitted to the Australian Securities Exchange, was electronics, which the retailer said had continued to impact the bottom line.

The results report outlined that “fashion and beauty delivered sales growth in 1H13, however, this was offset by a significant decline in home categories, in particular electronics which continued to be challenging and subject to ongoing deflationary pressure.”

The report also noted that gross profit margins had improved by 110 basis points to 39.0 per cent, and that “further margin improvement is expected over time as the company exits DVDs, music and electronic games and improves its category mix by increasing space allocations for higher margin categories”.

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Although parts of the business struggled during the half-year, David Jones CEO Paul Zahra said the company was on track with its Future Strategic Direction Plan. First laid out one year ago tomorrow, the strategic plan was compiled to address the challenges that DJs was facing including “structural changes” and “macroeconomic headwinds”.

In today’s release, Zahra gave an update on the retailer’s progress with the plan.

“Our 1H13 profit after tax has been impacted by ongoing investment in implementing our Future Strategic Direction Plan as well as challenging retail conditions,” said Zahra.

“We have continued to make good progress in implementing our Future Strategic Direction Plan and delivered the initiatives outlined in the Plan within the timeframes communicated to the market," he added. "Our focus going forward is on improving our sales, margin and labour productivity per square metre.

“We are confident the investment we are making will provide us with a strong sustainable business capable of addressing the retail structural changes currently taking place and positioning us for long term success.”

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