Department store David Jones has reported a 19.6 per cent drop in first half profit after tax to $85 million, citing tough trading conditions as the cause.
The results, for the six months ended January 28 2012, also revealed an 18.1 per cent decline in earnings before interest and tax (EBIT) to $125.8 million, from $153.7 million in the previous corresponding period.
In the face of these results David Jones has also released a report on the company's future strategic direction, detailing the existing strengths of the business, the challenges ahead, opportunities for growth and key areas for improvement going forward.
The company has also embarked on a “Three Point Strategy” that builds on its existing strengths, leverages opportunities for growth and addresses the challenges facing the business. The strategy involves significant investment in resources which, according to the company, will impact its financial performance in the short term, but will ultimately position David Jones as a successful omni-channel retailer.
As previously reported on ragtrader.com.au, the company recently signed a multi-million dollar deal with technology giant IBM to create a multi-channel retail systems platform.
Today, the company revealed that the joint IBM project will involve designing a new David Jones web-store, to be launched during the first quarter of 2013, as well as a transactional mobile web-store, native mobile applications, and a social commerce store, which will allow customers to browse, purchase and organise delivery via the company's Facebook platform.
These sales channels will be promoted through an integrated marketing program, across both traditional and digital channels, integrated products offers and content, and inks to the David Jones corporate site, as well as store-based activities.
On the bricks-and-mortar front, the company has also confirmed it has approved the refurbishment of five high-value stores over the next few years, including the Miranda, Elizabeth Street and Burwood complexes in New South Wales, the Toowong store in Queensland and Karrinyup in Western Australia.
David Jones will also add six new stores to its retail network, increasing its retail portfolio to 42 stores nationally. Two of the proposed new stores, in Highpoint (Victoria) and Indooroopilly (Queensland), have already commenced construction and are due to open for trade during fiscal years 2013 and 2014 respectively.
The company will also invest in a raft of smaller format David Jones outlets, to complement the new full line department stores, in attractive locations. Thee stores will be approximately 7000 square metres in size and will be based on the on the format of the successful David Jones Claremont Quarter (WA) complex. Each of these smaller format stores in expected to deliver $2 million of incremental EBIT.
Customer engagement across the board will also be increased, via a David Jones Platinum card which is due to launch in the second half of calendar year 2012, with further improvements also flagged for the rewards program on the David Jones American Express cards.
However, despite detailed plans to turn the company's fates around, David Jones CEO Paul Zahra warned that the company's profit after tax guidance for financial year 2012 is expected to decline by 35 to 40 per cent, compared to figures from 2011.
Zahra said the figures will most likely reflect the sales decline in the second half of 2012, clearing costs associated with excess inventory, transformation initiatives and direct and indirect costs associated with this, and the recent macro economic conditions.