Department store David Jones has suffered a slide in annual profit, citing higher costs, discounting and its deal with Dick Smith Electronics for the drop.
The retailer reported a profit after tax of $95.2 million for the 2013 fiscal year ended July 27,2013, down 5.9 per cent from the previous corresponding period.
The figure included a ‘one-off’ charge of $9.1 million pre-tax, relating to the sale of electronics inventory to Dick Smith as part of the Retail Brand Management Agreement (RBMA) entered into with Dick Smith on August 12, 2013.
David Jones revenue for the period also decreased by 1.2 per cent to $1.8 billion, with total sales also down by 1.2 per cent and like-for-like sales down by 1.8 per cent.
The company said the results reflected “subdued consumer sentiment and the company’s strategy to reduce discounting events and focus on full margin sales”.
David Jones CEO and managing director Paul Zahra added that retail conditions were challenging throughout the year as a result of consumer sentiment remaining subdued and aggressive discounting in the market.
According to the company, discounting was particularly pronounced in the second half of the financial year due to the unseasonably warm winter.
"I am pleased to report that in fiscal year 2013 we made good progress in implementing our Future Strategic Direction Plan. We have transformed our business from a 'bricks and mortar' retailer into an omni channel retailer and made significant progress in reducing retail prices of the international brands we stock through our cost price harmonisation program.
“In addition, we rolled-out new technology through our business; including a new point of sale system with stock search capability, traffic analytics and 'daily sales and productivity' reports for frontline staff members,” Zahra said.
"As a result of this work we are well positioned to fully leverage any improvement in consumer sentiment as and when it occurs.”
Going forward, the company cited predictions by “a number of economic forecasters”, which have noted that consumers remain cautious given the soft outlook for the labour market.
“Their view is that whilst household balance sheets look good, confidence remains soft given the general weakness in the domestic economy.”
As a result, Zahra said that given the environment, the company will focus on on managing those parts of the business that it can control, such as inventory, gross profit margins and costs.
“We also remain focused on the continued roll-out of our Future Strategic Direction Plan,” he said.
“Our company has a strong balance sheet, low debt, strong cash flows and owns its Sydney and Melbourne CBD flagship store properties.
“All of these factors will ensure we are well placed to capitalise on any strengthening in consumer sentiment as it occurs. Nevertheless, we expect that over the next 12 months trading conditions will remain challenging, with consumer sentiment continuing to be subdued and ongoing competitive pressure.”