If you’re already bearish on retail, this latest news is likely to confirm your view. If you’re contrarian, the steps the company’s board and management are taking will likely give you confidence that better times are to come.
I tend to be in the latter group on David Jones (and I own shares in the company), but this latest announcement certainly has enough for both points of view.
The company is forecasting a two-year wait for profit growth – with the 2014 financial year being the first year of lower profits from their credit card business, offset by the company’s forecast recovery in its core retailing business.
As The Motley Fool’s general manager Bruce Jackson told me this morning “it’s a long time for shareholders to wait… and lots of execution risk”.
He’s hit the nail on the head.
DJs looks to be making all of the right moves. The company is negotiating harder with suppliers to ensure it gets the best global prices, is investing in store staff and working hard to become an ‘omni channel retailer’ – industry speak for what’s colloquially known as ‘bricks and clicks’ with both a strong traditional retailing offer complemented by an online presence that the company thinks could eventually represent 10% of sales.
David Jones shares are down 8.5% this morning to $2.50 in early trade, up from lows of $2.38.
The key question confronting shareholders is whether they are prepared to wait for the strategy to bear fruit, and the amount of rope they’ll give the company – two years is a long time to wait, and a lot can go wrong (and a lot can change in the retail industry) in the meantime.
