Department store David Jones today reported a profit after tax (PAT) of $105.7 million for the six months ended January 29, 2011.
The result marks a 5.2 per cent increase on the retailer's PAT of $100.5 million in the previous corresponding period. Earnings Before Interest and Tax (EBIT) was also up, with the David Jones department store business reporting a 4.2 per cent increase to $130.9 million, up from $125.6 million in the first half of 2010.
David Jones chief executive Paul Zahra credited the company's solid half year performance to its resilient business model with distinct competitive positioning.
“Our ability to deliver these strong results is testament to the strength of our business model and its ability to generate shareholder growth throughout the peaks and troughs of the economic cycle,” he said.
“Our company has continued its stringent management of costs, making good progress in implementing [various] cost efficiency initiatives.”
However, the retailer's gross profit margin fell by 1.1 per cent, reflecting the heavy promotional activity and discounting by retailers.
David Jones also closed two of its tier four stores in Toombul (QLD), Newcastle (NSW) on January 29 this year with Zahra citing poor performance of these stores as the cause.
New stores and refurbishments, however, were abundant. David Jones recently celebrated the launch of the redeveloped Claremont Quarter in Western Australia, and completed refurbishments in its Kotara and Wollongong stores in New South Wales. Work has also commenced on major upgrades of the company's Chadstone (VIC) and Waringah Mall (NSW) stores.
The retailer also entered into an agreement in February to start work on the new Highpoint shopping centre in Victoria, and has another four developments in the pipeline across Macquarie (NSW), Pacific Fair (QLD), Sunshine Coast (QLD) and Whitford (WA), with all centres to be launched from 2013 to 2016.
David Jones also successfully launched its online site in November 2010 and the site has been trading continuously since then, with the company working towards becoming a multi-channel retailer with an integrated digital marketing plan in place.
Zahra said he sees the “online business as a growth opportunity in the medium to long term”.
Despite the loss of iconic Australian label Sass and Bide to rival department store Myer earlier this year, the company also announced in January that 30 new brands will soon join the David Jones stable. According to the retailer, the new brands will join David Jones on a exclusive basis as part of a clear plan to fully replace Sass and Bide sales with other brands from Winter 2011.
Going forward, the company has reaffirmed a five to 10 percent PAT growth guidance for the second half of 2011, assuming consumer sentiment does not deteriorate further. A further update on the company's trading conditions will be provided in May this year, which will include results from the Easter trading period in mid to late April.
For an insight into how strict supplier negotiations could have aided this result, pick up a copy of Ragtrader's April 8 edition.