DJs reveals 40% slump in earnings

TROUBLED upmarket retailer David Jones' turnaround plan has failed to excite investors after the company posted a 40 per cent full-year profit drop and scrapped guidance for next year.

DJs also raised the potential for a sale of its four flagship Melbourne and Sydney CBD properties, putting a $612 million price tag on the portfolio in an effort to reassure investors of the company's value.

The company has struggled with a confluence of challenges, including faltering consumer confidence, the strength of the dollar, which has made online shopping overseas more attractive, and globalisation of the industry in which consumers increasingly compare and shop across a variety of outlets instead of relying on a single chain. David Jones, like Myer, also pays higher wages relative to its global peers.

It yesterday handed down a net profit of $101.1 million for the year to July 28, a drop from $168.1 million a year earlier. Sales fell 4.8 per cent, although they improved on a quarterly basis during the year.

Chief executive Paul Zahra has pinned hopes of a recovery on a so-called omni-channel sales strategy aimed at capturing more revenue online and through mobile phones, technology upgrades, lower structural prices for goods and a rethink of its store layout strategy. DJs aims to restore its gross profit margins to as much as 40 per cent ''over time'', which it is doing by cleaning out inventory, renegotiating supplier prices lower, and trimming its half-year clearance sale.

''We are confident that the investment we are making in our business and in the implementation of our strategy will position us well for long-term success in the current changing retail landscape,'' he said.

DJs had made ''good progress'' in lowering supplier prices to bring them closer to global prices, part of its broad strategy to remain viable in customers' eyes.

Shares in the company originally fell as much as 5¢ to $2.22, before closing down 1¢, or 0.44 per cent, at $2.26. Over the past two years, the company's shares are down more than 50 per cent.

''While I think it's the right strategy … I think it's still fully valued and there are still a lot of risks in the earnings,'' said Evans and Partners retail equities analyst Tony Wilson.

A second equities analyst, who asked not to be named, said David Jones was doing positive things that would help halt the profit drops but there was ''nothing to indicate a turnaround is imminent, so therefore there is no guidance''.

Mr Zahra said DJs was on track to launch a revamped website in the first quarter of 2013, backed by a robust content management system, order system and new warehouse management capabilities.

But the ability to reposition the company for the future remained unclear.

''The challenge for a lot of organisations like David Jones is that the whole business is mired in the processes of the past,'' said Peter Applebaum, managing director of Sydney social marketing agency Tick Yes.

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