Down, down, profits are down: Dull trading bites DJ as profits, sales fall as the high end retailer feels the pinch.
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The results for 2011 financial year for David Jones, just announced, paint a somewhat bleak picture for outlook for retail on the high street, with profit after tax down 1.5% to $170.8 million, sales down 4.4% to $2053.1m.
DJ boss blamed “extremely challenging retail conditions” and investment in new IT and point of sale systems for the profit drop, which saw earning slip 1.1% from $249.2m to $246.5m.
The clothing giant, fronted by model Miranda Kerr, is just one of several big names reporting bad trading conditions of late, blamed on strong Aussie dollar and poor consumer sentiment amid global financial tumult.
June and July were singled out as particularly dreary months at the tills although profit drop was in line with guidance of -0.5 to -0.2%, at the company which counts high end brands like Hugo Boss Women, Gucci Jewellery and Kardashian Kollections as its own.
However, sales for Q1 2012 looks to be even worse with sales forecast to drop a phenomenal 10% and profit after tax guidance ofbetween -15% to -20%.
Nonetheless, Paul Zahra, DJ’s Chief, is confident of the road ahead, despite the slump and has “strong balance sheet, low debt, solid cash flows.” Cost of business also fell as management look to increase efficiency amid the poor trading conditions and slumpy sales.
“Throughout 2011 we made a conscious decision to invest in initiatives that would secure the long term success of our business and establish us as a successful multi channel retails.”
DJ has also bolstered its online store, adding 2500 items to buy via the web, developed Facebook and Twitter accounts, introduced customer promotions and events like Girls Night Out and 4 Day Customer Shopping Event.
“We have over the past 12 months invested in many initiatves that will deliver long term growth for our business that will generate sales in other ways than thorugh constant discounting.”
5 new stores are planned including one in Highpoint Victoria as well as outlets in Macquarie NSW, Whitford WA, and two in Qld. Several refurbished stores are performing well despite the difficult environment, Zahra insisted.
“We are well positioned ot trade through the current challenging environment and deliver sharegolder value over time,” Zahra reassured investors. Full year dividend per share is 28c, down from 30c in 2010.