David Jones is dressed up and ready to go

2013 accounts demonstrate the underlying potential of this department store.

a woman

Having invested a further $78.8 million in the business over 2013, David Jones (ASX: DJS) is now nearly dressed up and ready to go. Features of the 2013 accounts include:

  • Underlying profit up slightly to $101.6 million — however reported profit of $95.2 million is down 5.8% on 2012 due to charges (inventory writedowns, etc.) associated with the Dick Smith agreement.
  • Gross profit margin improved to 38.3%, despite poor winter season. By comparison Myer (ASX: MYR) achieved a gross profit margin of 41.7%.
  • Closing inventory was down 6.6%, indicating sound controls are in place.
  • Earnings per share came in at 18c (after Dick Smith adjustments). A 17c per share dividend was fully franked.

There’s no real secret about a well-run retail business — knowledgeable service, an appealing range of products and good inventory management just about covers it. David Jones is making steady progress with these goals — investment in staff training continues to increase, and highly productive personal shopping consultants are employed in the major stores.

With the increasing emphasis on fashion and beauty, the price harmonisation program is just about complete and exclusive deals with successful brands continue to increase.

A negative to be faced in 2014 is the profit-guaranteed joint venture with American Express, which has now converted to a profit-sharing arrangement. Management has confirmed this is likely to result in a 50% fall in earnings before interest and tax for the financial services segment.

Progress is being made with private label merchandise and the intention is to have 5%+ of sales private label by the end of 2014. As private labels earn a higher gross margin, David Jones has been very slow off the mark with this strategy.

Interestingly, property holdings are valued at a net $1.15 per share. Management has indicated that the Market Street store in Sydney may be first in line should any development involving the airspace proceed.

David Jones has now established advanced and robust online channels and platforms. Sales are increasing rapidly (off a low base) with a 711% increase in the last quarter. Average order size is three times in-store transactions. Pre-depreciation, online channels are expected to deliver a profit in the first full year of operation.

Foolish takeaway

Since 2010, David Jones has transitioned from being an old fogey retailer with antiquated systems to a contemporary multi-channel merchandiser. Although there is still more to be done, Paul Zahra and his team have laboured through one of the worst retail downturns in our history. With high leverage to increasing business and consumer confidence David Jones may be seeing its boat come in. Investors have welcomed the result with the share price rising 6% on heavy turnover. David Jones is definitely one for the watchlist.

Interested in our #1 dividend-paying stock? Discover The Motley Fool’s favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of “The Motley Fool’s Top Dividend Stock for 2013-2014.”

More reading

Motley Fool contributor Peter Andersen owns shares in David Jones.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of January 12th 2022

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

asx share price competitions represented by businessmen arm wrestling
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

person reading news on mobile phone
⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »