David Jones (DJS) is a leading retailer with stores throughout Australia. The Group operates 38 department stores and warehouse outlets and markets its own private label as part of its merchandise brand mix.

The H104 result was built on core growth but assisted by operating improvements. On only a 2.4% increase in sales to $926.3m, continuing operations EBIT increased 22.4%. Gains were made at the gross margin, which increased from 36.9% to 37.7% and the cost of doing business grew at a rate less than sales, up 1.8% to $299.1m. Lower depreciation expense by $3.1m due to last year's writeoffs, restructuring and lower capex, also assisted EBIT. Less interest expense, indicative of the improved balance sheet, led to an increase in pretax profit of 25.1%.In June 2003, DJS strategy refocussed on core department stores. This restructure involved the exit from Foodchain (achieved 28/6/03), repositioning the Online business (general merchandise ceased to be available online from July 2003) and a thorough review and assessment of the store portfolio (resulting in writedowns at Hornsby (NSW), renegotiation of the Fountain Gate (Vic) lease and closure of the Rockingham (WA) at the end of July 2004). A new cost management program targetting specific areas was commenced as part of the strategic review. Management expects to deliver $17m in budgeted cost savings in FY04. Generating higher returns from the capex program is another goal of the new strategy. DJS has allocated $50m per year over the next five years to capex, compared to $61.9m in FY03 and $70.6m in FY02. At the AGM, management said they were on track to deliver 1.5-2.5% sales revenue growth in FY04 and NPAT of $52 - 56m pre pref dividends. Thereafter, they are targeting 5-10% growth per year in NPAT for FY05 and FY06.

30/07/03

Leading Index

ASX 200

Sector Index

Consumer Discretionary

Industry Group

Retailing