David Jones and Myer post good profit, but sales are slowing

High end Australian retailer David Jones has posted a 25% rise in net profit to $89 million for the half year to January.

This morning Myer posted net profit of $78.02 million for the half year to 26 January 2008, up from $57.09 million in the previous corresponding half.

“The 2008 half year has seen strong growth in net profit after tax as a result of operating revenue growth and continued strong cost control,” Myer said in a statement to the stock exchange.

But Myer’s revenue from the sale of goods for the half fell to $1.63 billion, from $1.66 billion in the previous corresponding half.

David Jones’s solid profit result was also overshadowed by news that sales growth had slowed dramatically in the current half, as plunging consumer confidence levels begin to take hold.

Like-for-like sales growth for the past two months had dropped to about 2% from a rate of 7% for the January half year reported.

David Jones is braced for flatter sales growth as discretionary consumer spending is hit by higher interest rates and the costs of living. In particular sales of “big-ticket” items such as bedding or TVs will feel the pinch from cutbacks in discretionary spending.

“We were waiting for a decline in discretionary spending and it now looks to be happening … especially with the higher interest rates,” DJs CEO Mark McInnes told The Australian Financial Review.

He argues that David Jones has planned for the downturn since last August and is well positioned to meet net profit growth guidance of between 8 % to 13% for the second half of 2008.

“We expect the retail conditions in the next 12 months to be very different from the past 12 months. To be successful in the next 12 months, you’ve got to manage your inventory and your cost line because you are not going to get top-line sales growth.”

David Jones announced an interim dividend of 11c per share fully franked for first half (payable 7 May), up from 9c in the corresponding period last year.