David Jones says profit margins are growing and consumer confidence is improving.
The company has increased its first-half earnings outlook to approximately 10 per cent growth, from previous estimates of between 0 and 5 per cent.
The company’s chief executive, Mark McInnes, says he is happy with the strength of sales in a period where most Government stimulus had already passed.
“Despite a very competitive retail environment in 2Q10 [2nd quarter of financial year 2009-10] with heavy promotional activity by retailers struggling to maintain sales momentum without the help of the December 2008 stimulus package, I am pleased to report that our gross profit margin and our earnings before interest and tax (EBIT) margin improved compared to the same time last year,” he wrote in a statement.
He also told investors in a teleconference that the company’s business model was largely to thank for the profit performance.
“Our business model is strong and resilient. We have improving gross margins, lower costs, EBIT margin expansion, clean inventory, low debt, strong cash flows and a proven track record of creating shareholder value.”
Mr McInnes delivered a cautiously optimistic outlook for the half-year ahead, which will be compared with the worst period of the financial crisis.
“We are cautiously optimistic about the winter trading half. Our caution is based on cycling the 4Q09 Government stimulus, however that said, we are cycling (in February and March) the worst of the 2009 economic downturn,” Mr McInnes said.
It is anticipating second-half growth of between 5 and 10 per cent.
Investors seem moderately pleased with the outlook, with David Jones shares rising 5 cents to $4.66 by 12:25pm (AEDT), despite a 1.1 per cent slide in the broader market.