ferret's stock to watch: david jones limited

Ferret's stock to watch: DAVID JONES LIMITED
08:23, Thursday, 19 May 2005

Sydney - Thursday - May 19: (RWE Australian Business News)
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DJ'S LOOKING AT MYER AS SALES RECOVERY CONTINUES

OVERVIEW
********

David Jones Ltd (DJS) is gradually regaining its image in the
retailing industry as an upmarket profitable business.

Last week the stock market was abuzz with rumours that DJs was
interested in a piece of Myer but only in the good parts of its 61
stores.

What a turnaround for the books that Myer, the 20th century
retailing giant, is falling on hard times into the 21st century.

From the 1900s onwards Sidney Myer was known as the "Gay
Provider" and became an icon in the Melbourne business world.

Myer took more than 100 years to become the most successful
retailer Australia has ever seen until its star waned, and it finally
teamed up with Coles.

It must have shocked a lot of Melburnians to hear Coles Myer
managing director John Fletcher saying the unthinkable - that Myer might
be given the opportunity to seek other pastures.

In other words the company, or part of it, might be up for sale
and David Jones was an interested party.

David Jones yesterday reported a modest improvement in business
with sales revenue rising 2.3 per cent to $390 million for the third
quarter ended April 30.

On a "like-for-like, calendar week adjusted basis", taking into
account the late start to the 2005 year (given that 2004 was a 53-week
year), sales growth was 0.3 per cent ($390 million versus $389 million).

The company again reassured shareholders that it was confident of
delivering net profit growth at the upper end of its 5 to 10 per cent
target range in 2005, as well as dividend growth.

It also re-affirmed guidance provided at the first-half results
that net profit growth in 2006, 2007 and 2008 would be within its target
range of 5 to 10 per cent a year and that it would continue to deliver
dividend growth in each of these years.

SHARE PRICE MOVEMENTS
*********************

Shares of David Jones yesterday rose 10c to $1.82. Rolling high
for the year has been $2.40 and low $1.56. Dividend is 12c a share to
yield an enticing 6.59 per cent.

Utilising the same calendar weeks as its major department store
competitor for the third quarter - namely the period ending on April 23,
which includes the last week of January, but excludes the last week of
April - David Jones's like-for-like sales growth was 1.6 per cent, on
sales growth of 5.4 per cent.

Chief executive Mark McInnes said, "We are pleased with our 3Q05
financial performance in particular given we are cycling high
like-for-like sales growth rates of 5.4 per cent in 3Q04 and 7.2 per
cent in 4Q04.

"All aspects of our business were well-prepared to deal with the
economic environment we are encountering.

"We were particularly pleased with the performance of our entire
Womenswear category - our Accessories, Cosmetics and Children's Apparel
categories also delivered solid sales throughout the quarter.

"As anticipated, we felt slowing in sales growth in particular
in our Menswear and Homewares categories," Mr McInnes declared.

The chief executive has already gone on record as saying David
Jones had worked hard since the start of 2005 to generate significant
sustainable savings through its cost efficiencies program and to ensure
inventory levels were tightly managed.

"It is pleasing to report that our inventory at the end of 3Q05
is at lower levels compared to last year," he said.

"In addition, we have carefully managed our category mix and
labour productivity to correspond with customer demand and to ensure the
most efficient use of inventory and labour without compromising service
levels.

"By managing our business to address the expected slowdown in
consumer spending in 2H05, we are well-positioned and confident that our
business model will enable us to deliver NPAT growth as well as dividend
growth in FY05," Mr McInnes said.

BACKGROUND
**********

The name of David Jones has been synonymous with upmarket
retailing for 166 years.

The company boasts it is not only Australia's oldest department
store, but the oldest department store in the world still trading under
its original name.

The family lost control in the 1980s when the company came under
the control of the Adelaide Steamship group, which later crashed and took
DJs with it.

John Spalvins, who controlled AdSteam at the time, used to take
great delight in wandering through the dazzling ground floor at the
Elizabeth Street store.

Charles Lloyd Jones was the last member of the family on the
board before it fell into outside hands.

His brother David, the real retailer of the family, died
prematurely of cancer.

Just 50 years after the founding of the (NSW) colony, Mr David
Jones, a Welsh-born immigrant, opened "large and commodious premises" on
the corner of George and Barrack Streets on May 24, 1838.

His mission: to sell "the best and most exclusive goods" and to
carry "a stock that embraces the everyday wants of mankind at large."

This has been the company's objective right up to the present
day.

No other Australian store has come near DJs for its upmarket
image that could claim Queen Elizabeth paid the Elizabeth Street store a
visit in 1954.

This image has been preserved right through to today despite the
company being many times on the brink.

David Jones came out of the AdSteam disaster in November 1995
when it was restructured and returned to the ASX list.

It still retains that niche though of being exclusive in its 36
stores across the country.

However, its big CBD stores were sold and re-leased at a time
when the company needed working capital.

ENDS

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I don't hold DJS