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Australia's David Jones posts smallest H1 profit fall in three years
March 18, 2014 / 11:31 PM / in 4 years

Australia's David Jones posts smallest H1 profit fall in three years

(Adds share move, company comments, details on earnings, background on merger proposal)

* H1 net profit A$70.1 mln vs A$73.5 mln forecasts

* Sales rise 3.8 pct to A$1.042 bln; same store sales up 1.1 pct

* David Jones considering takeover offer from Myer

SYDNEY, March 19 (Reuters) - Australia’s No.2 department store operator David Jones Ltd reported a 4.6 percent fall in first-half net profit, the smallest decline in three years, beating expectations as improved sales overcame lower earnings from financial services.

The results come as the 176-year-old retailer considers a takeover proposal from bigger rival Myer Holdings Ltd, with both firms looking to cut costs, take on foreign competitors and catch up with the boom in online shopping.

David Jones said its net profit after tax was A$70.1 million ($64.02 million)in the six months ended January 25. That compared with A$73.5 million a year ago and an average forecast of A$66.7 million from four analysts.

Total sales rose 3.8 percent in the half to A$1.042 billion and same store sales were up 1.1 percent, the company said. Online sales jumped 220 percent from a year before.

David Jones shares edged up 0.6 percent to A$3.35 shortly after the open, while the broader market slipped 0.1 percent.

Chief executive Paul Zahra, who announced last year he intended to leave the Sydney-based company only to change his mind after the board appointed a new chairman, said the result reflected the growth in its core department store business.

“Our department store business is delivering good EBIT growth,” Zahra said in a statement. “We are aiming for our online sales to account for 10 percent of total sales by FY18.”

In the clearest sign yet that it is seriously considering Myer’s offer, David Jones said on Tuesday it had hired a management consultant to investigate the value of what its Melbourne-based rival calls a “merger of equals”.

The company rejected Myer’s first approach in October, which proposed a nil-premium script deal at a ratio of 1.06 Myer shares for every David Jones share, valuing David Jones at about A$1.4 billion at the time.

Myer has asked David Jones to reconsider the bid - now valued at A$1.5 billion - saying its departing chief Bernie Brookes would stay on and could lead the A$3.3 billion combined entity.

Myer is due to report its first-half results on Thursday. ($1 = 1.0950 Australian Dollars) (Reporting by Maggie Lu Yueyang; Editing by Stephen Coates)

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