David Jones’ profit slumps 39% as the retailer looks to sell flagship stores

David Jones’ profit has fallen 39.9% on last year and the retailer appears is investigating selling its flagship stores in Melbourne and Sydney to stem its losses.

The department store reported profit after tax of $101.1 million for the financial year, a decline in sales of 4.8% and lower gross profit margins of 37.5%.

It attributed the lower margins to discounting in a competitive environment and the impact of dealing with excess stock at the start of the financial year.

Alongside the results released today David Jones released an update on its Future Strategic Direction Plan which will attempt to turn its ailing business around.

The plan includes a review of its four flagship stores in Sydney and Melbourne “to investigate opportunities to unlock and enhance the value of its property portfolio for the benefit of shareholders”.

Independent property consultant Cushman & Wakefield has been engaged to provide David Jones with an indication of the potential sale price of these assets, which it has calculated at $612 million.

David Jones’ figures follow Myer’s results last week, which recorded a fall in net profit of 14.3% in the year to June 30 to $139.365 million, while total sales fell by 1.3% to $3.1 billion.

David Jones chief executive Paul Zahra said in a statement the results were in line with the guidance the department store provided in March this year.

“It reflects the difficult trading environment during the year as well as the investment we have made in implementing our future strategic direction plan.

“In the financial year of 2012 we took the view that it was important for the long-term success of the business that we invest in the initiatives outlined in our future strategic direction plan, notwithstanding concerns about the current trading environment.”

Zahra says profits have been impacted as a result of this but says “the initiatives we are implementing hold us in good stead for the future.”

The Future Strategic Plan also confirms David Jones omni-channel strategy and Zahra claims the department store was on track to launch its new online shopping site by the end of 2013.

The online store will offer 90,000 stockkeeping units by Christmas 2012 as opposed to the old web store which offered 9,000.