why djs has been such a profitable short

David Jones string of profit increases from profit increases over the last decade has been achieved through margin expansion.

NOT SALES GROWTH

In 2001 DJS had sales of $1.7 billion
In 2011 DJS had sales of $2 billion, growth of just 17% over TEN YEARS.

But the kicker:
In 2001 DJS had an operating margin of just 6.2%, this showed a continued increase YOY over the decade, whereby by 2011 the operating margin had increased to 14.5%.

So DJ's profit increases have been comming from margin expansion not revenue.

(All data sourced from morningstar)

So along comes the internet and the rise in internet vs physical store comparison shopping, and what do we see???
That DJS prices are significantly higher than online prices.

Well dah!!!!, where do you think that margin expansion has come from?????

So for those value players out there, looking at things through the rear view mirror, how does your future profit outlook look if margins compress to some form of historical norm?????

With long term sales growth negligable and my expectation that margins will be on a structural decline, those historical profits are unlikely to be replicated anytime soon.

This stock is an AVOID from an buy and hold investors point of view, until such a time as we can see what the SUSTAINABLE margins are in the new environment.

Regardless of economic uncertainty in Australia, the impact of the internet is not going away.

THIS IS A STRUCTRUAL ISSUE, not a short term economic issue.