Retail stalwart may sell off CBD sites as profits slump 40%
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The shock move was suggested in a statement to the ASX today as DJ’s announced a massive 40 % net profit slump for FY12 to $101.1 million to the year end 28 July.
The profit haemorrhage was in line with market guidance and reflects difficult trading conditions and DJ’s investment in its strategic plan, CEO Paul Zahra, insisted.
However, in its property update to shareholders, the troubled retailer said it would “investigate opportunities to unlock the value of its property portfolio for the benefit of shareholders” and hired property consultants Cushman and Wakefield to estimate a potential sale price of its four CBD sites in Bourke St. Melbourne, and Elizabeth and Market St, Sydney.
Rental value on the four prime retail properties would be worth $39m to DJ annually and a total potential value of $612m, attractive income for the luxury high street retailer facing hard times.
DJ’s said it undertaking further assessments and will update the market in six months time.
“Our Company remains in a strong financial position with low debt. We have a strong balancesheet, solid cashflows and ownership of our Sydney and Melbourne CBD properties,” DJ CEO told shareholders.
Sales were down almost 5% to $1,8 billion, although there was an improved sales trend, quarter on quarter, similar to Myer who noted slight growth in the final quarter of FY12, last week.
“In FY12 we took the view that it was important for the long term success of the business that we invest in the initiatives outlined in our Future Strategic Direction Plan, not withstanding concernsabout the current trading environment,” Zahra added.
“Whilst our PAT has been impacted as a result of thisinvestment, the initiatives we are implementing hold us in good stead for the future.”
DJ future direction plan involves driving forth its omni or multi channel strategy and upping its online offering, saying it will have 90,000 SKU’s or unique products online by Christmas, opening new stores and launching its mobile web store.
In its results presentation, the company said it would engage in a cost harmonisation strategy across most product categories including electronic brands Beats Dr Dre headphones, Bose AV equipment, Canon and Olympus which it pledged to slash prices by 20%-28% as well as on its home, accessories and fashion lines.
“In FY12 we took the view that it was important for the long term success of the business that we invest in the initiatives outlined in our Future Strategic Direction Plan, not withstanding concernsabout the current trading environment. Whilst our PAT has been impacted as a result of thisinvestment, the initiatives we are implementing hold us in good stead for the future,” Zahra concluded.
Whether DJ will rent or sell its CBD sites, further store growth is part on DJ future strategy and the company has taken on lease for six new stores including Highpoint in Victoria, which will open in 2013
DJ’s net cashflows from operating activities were up 7.8% to $196.7 million.
The company also announced a final dividend to shareholders of 7.0cps fully franked, the FY12 full year dividend being 17.5cps fully franked.