David Jones has reported dismal numbers for the full year of 2012 but it’s only reflective of the company’s investment into its Future Strategy Direction Plan and the continuing difficult trading conditions.

The company’s profit after tax is down 39.9 per cent from $168.1 million in the previous year to $101.1 million. Sales also declined 4.8 per cent from $1.9 million to $1.8 million for the full year, however there was improved tracking in sales quarter on quarter throughout the year. Earning before interest and tax was also dropped from $246.5 million to $154.3 million, which is reflective of the decline in sales, lower margins and increased costs.

David Jones CEO Paul Zahra said it was important the company invests into the future of the company despite the impacts it’s having on current results, which are expected to continue into the 2013 financial year.

“In financial year 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, not withstanding concerns about the current trading environment. Whilst our PAT has been impacted as a result of this investment, the initiatives we are implementing hold us in good stead for the future,” he said.

The Future Strategic Direction Plan, which was announced in March, sets out the company’s “blueprint” for future growth including its transformation into an omni-channel retailer, growing the store network and strengthening the company’s core business.

“Whilst it is still early days, it is pleasing to report that good progress has been made in implementing our Future Strategic Direction Plan. We are confident that the investment we are making in our business and in the implementation of our strategy will position us well for long term success in the current changing retail landscape,” Zahra said.

”We are also committed to further evaluating and analysing the development potential of our property portfolio to enable us to unlock additional value for shareholders.”

At the time the Future Strategic Direction Plan was announced, the company acknowledged gross profit margins would be adversely impacted in financial year 2012 by the need to clear excess Inventory. To counteract this, David Jones has identified initiatives to help the situation including the renegotiation of vendor trading terms earlier in the year and a review of the company’s category mix, with a view to increasing the selling space allocated to high margin categories.

In addition, the company reduced both the duration of its Half Year Clearance event in June by two weeks and the number of discount tactical events in its promotional calendar.

The department store giant plans to restore its gross profit margins to benchmark of 39.5 per cent to 40 per cent over time.

As part its plan to make the shift towards becoming an omni-channel retailer, the company announced that it is on track to launch its new online shopping site by the end of the first quarter of 2013 financial year. The new online store will offer 90,000 Stock-Keeping Units (SKUs) in time for Christmas 2012 – a jump from the current 9,000 SKUs.

They also plan to launch a new mobile store and app specifically for iPads. They will also introduce new functionality to its online site including a store booking tool to be used across all channels and all devices. Click & Collect, incremental delivery options, social commerce and the option to purchase online from the David Jones gift registry will also be rolled out during financial year 2013.

David Jones also noted the company is working with suppliers to achieve global cost price harmonisation in order to maintain gross profit margin percentage. As a result has had success in delivering retail price reductions over the past six months across hundreds of SKUs in categories such as Fashion, Beauty, Accessories, Shoes, Homewares and Electronics.

According Zahra, the historical cost price differential in Australian retail is due to the strong Australian dollar, GST and tariff exemptions and higher cost structures such as rent, salaries and distribution channels.

“The price reductions achieved to date are pleasing, however they do raise the issue of deflationary pressure on our business. Some of this deflationary pressure has been offset by volume increases,” he said. “Importantly, we are undertaking a review of all categories with a view to maximising the space allocated to high margin products, which in turn will go some way in counteracting deflationary pressure.”