Department store David Jones has slashed its sales and profit guidance with rival Myer today also reconfirming that it expects to suffer a profit loss for FY2011.
The retailer, which initially stated in May that it expected to profit to rise in the second half of the financial year by five per cent, has now revised its position and confirmed this morning that total sales for the fourth quarter could actually fall to -11 per cent.
If this sales and profit after tax (PAT) guidance rings true, PAT would pan out to approximately $62 million and $64 million for the second half and between $167.7 million to $169.7 million for the full financial year – a profit fall of between nine and 12 per cent in the second half of 2011, and a full year profit fall of between 0.5 and two per cent versus last year.
David Jones chief executive Paul Zahra also forecast first half PAT (1H12 PAT) for 2012 to decline by approximately 15 per cent to 20 per cent compared to first half 2011, equating to forecast of $84.5 million to $90 million.
Zahra said the lacklustre guidance was a result of difficult trading conditions, made worse by soft sales throughout the all-important Clearance period in June and the Clearance Clearout in July.
“The dramatic and rapid deterioration in trading conditions in 4Q11 has been unprecedented. As a result we are taking a cautious approach to 1H12 and have planned and forecast trading conditions to continue to be challenging, with expected negative sales and action to mange inventory levels resulting in our forecast for 1H12 declining,” he said.
“By resetting our sales budgets we will be better able to manage our inventory and variable costs.”
Zahra also said that, despite the tough trading environment, David Jones would continue to invest in its online businesses, new Point Of Sale system, Financial Services business, brand installations, store refurbishments and the brand.
“We are confident that our business model will allow us to trade through these difficult times and leverage the benefits of better trading conditions,” he said.
David Jones also said it was premature at this stage to comment on PAT growth guidance for the second half of 2012, given the current trading conditions and consumer sentiment.
Department store rival Myer today also reconfirmed guidance, in an effort to “ensure the market is fully informed in the context of competitor announcements and other retail sector analysis”.
Myer said that subject to no further deterioration over the final two weeks of its financial year trading, its predictions in May regarding net profit after tax (NPAT) for FY2011 would remain unchanged, with NPAT for FY2011 to be up to five percent, below last year's figure of $169 million.
The retailer said full year 2011 results will be reported to the market in mid-September 2011.