DJs profit to slump but eyes on the future

16 Sep 2012, 12:30 pm   -   Source: AAP
David Jones is expected to report a profit slump of as much as 40 per cent. (AAP)

David Jones is expected to report a profit slump of as much as 40 per cent. (AAP)

David Jones is expected to announce a big slump in profits but analysts are positive about the department store's future.

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David Jones is expected to report a profit slump of as much as 40 per cent when it announces its full year results this week.

But analysts will be more interested in any news of a turnaround strategy for the troubled department store chain when it reports on Wednesday.

David Jones chief executive Paul Zahra has already flagged a decline in profit of between 35 to 40 per cent on 2010/2011 due to tough trading conditions.

City Index chief analyst Peter Esho said David Jones' results for its fiscal year to July 31 were expected to be disappointing but that the retailer was in a better position to evolve than its rival Myer.

Myer last week unveiled a 12.7 per cent fall in net profit to $139.4 million for the year to July 28.

Mr Esho said David Jones' financial services division through its credit card arrangement with American Express generated much of its earnings and it was in a stronger financial position than Myer because of its lower gearing levels.

"It has a different earnings structure and a different balance sheet position, which is why I think David Jones is in a better position to ride out a downturn and evolve than Myer," he said.

The biggest issue for David Jones going into 2012 was its level of inventory and, therefore, analysts would be closely checking the balance sheet.

Mr Esho said any outlook or strategy that David Jones could provide for 2013 would be welcomed in the market and reflected in the share price.

"For David Jones, I think there's going to be a good opportunity to really put to (the) market a new vision and a new strategy," he said.

David Jones shares went on a rollercoaster ride earlier this year when British firm EB Private Equity made a $1.65 billion bid for the department store chain before quickly retreating amid speculation that the offer was not credible.

The Australian Securities and Investments Commission is investigating potential issues regarding the disclosure and trading of David Jones shares over the incident.

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