is looking bullish, page-3

Looks interesting,
Should also be good for other stocks like JST.

David Jones 1st-Half Profit Rises 22% on Cost Cuts (Update3)

March 22 (Bloomberg) -- David Jones Ltd., Australia's second- biggest department store, said first-half profit rose 22 percent on cost cuts and surging earnings from its credit card business. The shares had their biggest gain in four months.

Net income in the six months ended Jan. 29 increased to a record A$52.9 million ($42 million), or 11.5 cents a share, from A$43.4 million, or 9.4 cents, a year ago, Sydney-based David Jones said in a statement today. The result beat the A$49.4 million median estimate of five analysts surveyed by Bloomberg.

Chief Executive Mark McInnes, 40, boosted profit by cutting costs, closing an unprofitable outlet, increasing sales of cosmetics and fashion and expanding use of its credit card. David Jones stock rallied on optimism the company, Australia's only department store to sell A$4,795 Donna Karan frocks, will be able to increase profit even as higher borrowing costs deter consumers from spending.

``I don't think the interest rate rise has been enough to affect David Jones and this result suggests that is still true,'' said Rob Patterson, who holds 3.3 million David Jones shares for the equivalent of $1.6 billion he manages at Argo Investments Ltd. in Adelaide. ``It was a good quality result and the brokers will probably have to upgrade their forecasts.''

Australia's central bank increased borrowing costs for the first time in 15 months on March 2.

David Jones shares rose 9 cents, or 4.6 percent, to A$2.04 at 11:32 a.m. in Sydney. For the year they've dropped 8.1 percent.

Credit Card Earnings

Department stores earnings before interest and tax rose 20 percent to A$59.6 million on higher sales of women's clothing, electrical products, accessories and cosmetics and lower costs.

David Jones is more profitable than the department store unit of larger rival Coles Myer Ltd. David Jones stores have a profit margin, or earnings as a percentage of sales, of 6.1 percent compared with 1.8 percent at Myer outlets.

Credit card EBIT rose 24 percent to A$15.3 million, representing about a fifth of the total. The business, which charges a 21.9 percent interest rate after an initial period of up to 57 days without cost, is expected to boost earnings between 5 percent and 10 percent a year after 2005. Coles Myer's credit card is owned and managed by General Electric Co.'s finance unit.

McInnes kept his forecast for full-year profit growth of 10 percent, suggesting 2005 net income of A$71.8 million, up from A$65.3 million a year earlier.

Sales in the first-half rose 5.9 percent to A$1.01 billion. David Jones expects ``flat'' sales growth in fiscal 2006 as consumer spending slows. Earnings will increase between 5 percent and 10 percent in the period.

Inventory Management

``Our business model will enable us to outperform the economic cycle, even in times of slower revenue growth,'' McInnes said in the statement. ``Our confidence stems from our cost efficiencies program, our credit card business and our tight inventory management.''

David Jones will pay a first-half dividend of 6 cents, up from 5 cents a year ago.

McInnes has revamped the company's shareholder discount program after Coles Myer ended a similar offer in July. David Jones shareholders will now get a 3 percent discount on all items, eliminating the higher reduction for clothes and cosmetics, which will save as much as A$3.5 million per year.

The company said it is still reviewing plans for a possible share buyback or special dividend.