David Jones’ full-year profit falls again

David Jones’ full-year profit fell another 42 per cent after the department store chain focused on discounting amid the disruption of its flagship Sydney store refurbishment.

South African owner Woolworths Holdings on Thursday reported an operating profit of $37.0 million for David Jones, compared to $64 million in the prior corresponding period.

DJ’s gross profit margin for the 53 weeks to June 30 was 1.1 per cent down on the the prior period as a result of higher markdowns and an increased focus on clearance.

Turnover and concession sales declined by 0.8 per cent, with comparable store sales 0.1 per cent lower.

Store costs increased by 1.9 per cent, but other operating costs were 6.6 per cent lower as a result of various cost savings initiatives.

Having opened two new stores during the year, Woolworths is now looking to concentrate its efforts on slimming down DJ’s footprint.

“Space reduction to improve the productivity of the existing store portfolio is a priority,” Woolworths Holdings said in a statement to the Johannesburg Stock Exchange.

Woolworths, which has written off more than half the value of the chain since acquiring it five years ago, said second-half sales were reduced by about three per cent as disruption from the Elizabeth Street flagship store hit a peak.

The Elizabeth Street store’s fashion and beauty floors will be completed ahead of the Christmas trading period, with the below-ground food and home floors opening in March.

Woolworths most recently struck $437.4 million from the value of DJs in the first half of the 2019 financial year, reducing the value of the chain to $965 million from $2.2 billion in 2014.

“The WHL Board believes that the valuation of David Jones is realistic and reflective of its prospects,” Woolworths said.

“The board is focused on the turnaround of David Jones and is ensuring that the business effects the necessary actions.”

David Jones this week announced it was looking to diversify from the under-pressure department store sector by selling ready meals and other food at BP petrol stations.

With comparable sales for DJs stablemate Country Road Group shrinking by 0.6 per cent amid a second-half slowdown, Woolworths said Australian retail conditions will continue to be tough with heavy discounting and promotional activity.

David Jones’ traditional rival Myer reports its earnings next Thursday.

AAP

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