DJs recognises change as profits flop

Published on Wed, 21/03/2012, 05:20:11

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While Myer continues to roll-out its five point strategy, David Jones has narrowed its future plans down to a ‘three point strategy’.

The company has acknowledged it recognises the Australian retail industry is facing a number of challenges including structural changes, macro-economic headwinds and challenging Australian consumer credit markets. And in order to be part of this change, it will be implementing its ‘three point strategy’.

This comes after the company reported a 19.6 per cent shrinkage in half-year profits to $85 million versus $105.7 million for the same period last year. Its earnings before interest and tax also decreased 18.1 per cent to $125.8 million.

The first part of the strategy is ‘transformation’ of its omni-channel retailer (OCR), which will go hand-in-hand will transforming its customer service and engagement.

Progressively throughout 2012, the company will increase its online SKUs from 9,000 to 90,000 before Christmas 2012 before seeing the relaunch of the David Jones Webstore in the first quarter of the 2012-13 financial year. Its OCR will also integrate the shopping experience across sales channel of a mobile webstore, application, social commerce store and contact centre.

David Jones CEO Paul Zahra said based on international experiences the omni-channel shoppers are four to six times more valuable than single channel customers, demonstrating plenty of potential for the company.

 “Whilst we acknowledge that our transformation into an OCR will take time, given online retailing in Australia in 2011accounted for 4.9 per cent of total retail sales we are confident we can move at the right pace to capitalise on this opportunity,” he said.

“The success of international department stores such as Nordstrom (US) and John Lewis (UK) who have adopted OCR business models clearly demonstrates that there is great potential for well managed Omni Channel department store businesses that build on their existing network of stores, their existing customer base and their existing brand positioning to offer customers new ways to shop and different shopping experiences.”

The company also plans to transform its pricing strategy by managing with its suppliers the transition to global Cost Price Harmonisation.

“The concept of price harmonisation around the world is well understood and applied by international luxury brands. These brands understand that in order to preserve the value and positioning of their brands they cannot have material price discrepancies in different geographic markets as it will focus consumers on price as opposed to the allure, status and fashionability of the brand,” Zahra said.

Secondly, David Jones will grow its store network with plans to open six more new stores. At the same time, they will open several smaller format stores which are expected to deliver at least $2 million each per annum of incremental EBIT.
The third part of their strategy is strengthening the core business by implementing initiatives that will help restore its GP margins to a long term sustainable range of 39.5 per cent to 40 per cent and generate incremental sales and EBIT through refurbishments.

“We have entered an era which is both challenging and full of opportunity and are well positioned and prepared to adapt to the changing environment around us. Based on the success of international Omni Channel department stores we are confident that we have the right strategy in place to deliver sustainable future growth for our shareholders,” Zahra said.

”Our “Three Point Strategy” will enable us to create a strong business model from which the Company will be well positioned to deliver year on year sustainable PAT growth. It will provide us with enormous leverage to generate sales and PAT growth as and when the macro-economic environment improves.”


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