UPDATE 2-David Jones Q2 sales up 8.9 percent, shares gain
(Adds plans for credit card, analyst reaction)
By Victoria Thieberger
MELBOURNE, Feb 14 (Reuters) - Australian upmarket retailer David Jones Ltd. (DJS.AX) said its second-quarter sales rose 8.9 percent after bumper Christmas sales, and reiterated it expected 25-30 percent profit growth in the first half.
The news pushed shares in the country's second-largest department store operator to a record high, as it benefitted from the recent sale of its major department store rival Myer to a private equity consortium.
"It's very impressive and DJs continues to out-trade its competitors. It's certainly taking advantage of the repositioning of Myer," said Commsec analyst Grant Saligari.
David Jones Chief Executive Mark McInnes pointed to a strengthening in consumer sentiment and the changing competitive dynamics in the department store industry.
The retailer, which attracts higher-income shoppers, has seen buoyant sales while consumer spending at discount stores has struggled in recent months.
Designer brand clothing for men and women and sales of Apple's (AAPL.O) iPods were particularly strong in the quarter.
David Jones was benefiting from a reduction in discounting and promotions at larger rival Myer, which Coles Group Ltd. CGJ.AX sold last year to a private equity group led by TPG-Newbridge, McInnes said.
Sales for the three months to Jan. 27 rose to A$607.3 million ($474.5 million) from A$557.6 million, in line with the company's January forecast for an increase of 8 to 9 percent.
David Jones said the sales performance was in line with updated guidance given last month, when it raised its first-half underlying net profit growth forecast to 25-30 percent from 8.5-13.5 percent, or about A$97 million to A$101 million.
For the first half, sales rose 7.8 percent to A$1.037 billion.
David Jones shares rose to A$4.94, before easing to be up 1.9 percent at A$4.89 in a broader market up 0.5 percent.
The retailer, which has 36 stores, has said it wanted to see trading in the second half before upgrading its full-year forecasts.
The company also said it has received proposals from seven financial institutions interested in partnering for a general-purpose credit card, including Citigroup Inc. (C.N), General Electric Co (GE.N) and HSBC HSBC.L (0005.HK) and some of Australia's largest banks.
"There has certainly been enormous interest," for what would be Australia's largest private credit card, Damian Eales, group general manager of financial services, told reporters.
CommSec's Saligari said a general purpose card was a "very significant" development for the retailer.
"Their store card is generating in the vicinity of A$30 million of earnings, so if they are able to leverage that customer base into using the credit card elsewhere you potentially have a multiple of that earnings," he said.
($1=A$1.28)
((Editing by Richard Pullin and Jean Yoon; victoria.thieberger@reuters.com; Reuters Messaging: victoria.thieberger.reuters.com@reuters.net; +61 3 9286 1421)) Keywords: DAVIDJONES/SALES
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