David Jones

By Dan Stratful

Thursday 22nd December 2011 1 Comment

David Jones (ASX: DJS) is another Australian retailer that investors should avoid after a string of profit downgrades recently in the Australian retail sector that include Billabong, JB Hi Fi and Kathmandu.

DJS is Australia's oldest department store and was established in 1838 with the opening of its George Street store in Sydney. DJS has experienced growth in store numbers over the last 90 years and as a mature business, it anticipates only 5 new stores to be opened over the next 5 years. Other services include consumer finance in the form of the David Jones American Express Card and an online shopping site which was launched in November 2010.

DJS has good brand power, public affection and a track record of profitability, and despite the closure and re-opening of stores over the years, it has moved with the times and was up until recently, reporting record results.

But as a retailer offering top end goods, DJS may see a dampening of consumer demand in 2012. Total sales in the year to 30 July 2011 (FY11) slipped to $1.9 billion from $2 billion in the previous year, while Earnings before Interest and Tax (EBIT) in FY11 was $246.5 million, down 1.1%.

Profit in the year to 30 July 2012 (FY12) will be lower again, as DJS’s guidance for the first half of FY12 is for a 15% to 20% fall in profit after tax. A further profit downgrade in early-mid 2012 would come as no surprise.

DJS’s shares today traded at $2.48

Status: AVOID

For sharemarket and fixed income trading enquires contact:
Dan Stratful at Investment Research Group (IRG)
Authorised Financial Adviser (AFA)
0800 437 8489, 09 304 0232, dan.stratful@irg.co.nz
**A disclosure statement is available, on request and free of charge.

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Comments from our readers

On 22 December 2011 at 5:31 pm Robert said:

I am amazed how these financial "whiz Kids" are talking down this stock ? - the trading figures are only slightly down & after all a Profit is a Profit ! & a 1.1% decrease ? - a mere " spit in the Ocean"