The other point of difference between Myer and David Jones is the additional emphasis David Jones is placing on the opening of new stores, including a smaller store format. It plans to open six new full-line stores and several smaller format stores, as well as to refurbish five existing stores. It says the new full-line stores are expected to generate at least $280 million of incremental sales a year and $30 million of earnings before interest and tax. Myer, of course, has a much bigger store network than David Jones to leverage into an omni channel strategy.
To execute its strategy David Jones plans to spend $70 million to $80 million a year, funded by cash flows and landlord and supplier ‘contributions', with significant investment over the next 18 months and extra costs to be incurred over the next 12 months. David Jones will add around 200 staff to support the new strategy.
With an expectation that the group will face increased funding, labour, occupancy and utilities’ costs, David Jones is targeting a $30 million reduction in its cost of doing business over the next three years to offset those cost pressures and restore its gross profit margin to 39.5 per cent to 40 per cent. That margin fell 180 basis points, to 37.9 per cent, in the latest half.
DJS Price at posting:
$2.43 Sentiment: LT Buy Disclosure: Held
