David Jones starts to put a bit of the `up' into upmarket retailer

Chief executive Peter Wilkinson reported that sales in the 13 weeks ended July 27 were up 10.4 per cent for the upmarket department store chain, to $425.8 million.

It appears that a large portion of the gains were made at the expense of rivals, in particular Coles Myer's Grace Bros stores.

Mr Wilkinson said his company had continued a pattern struck in the past three years and improved market share again to around 13 per cent.

There were no signs of Grace Bros, in the midst of a profit recovery program, making any inroads into David Jones's sales.

``It's hard to argue they're penetrating our market position," Mr Wilkinson said.

Asked if David Jones had taken business from its struggling rival, Mr Wilkinson said: ``Oh, yes."

``We have got a bit of rhythm and momentum and there's no reason to think it should stop.

``The consumer confidence in evidence since the start of the calendar year appears to be holding, despite the emerging volatility in overseas markets."

David Jones shares rose 3c to $1.01, still near historic lows, while Coles Myer ended a patchy day's trading 3c higher at $6.14.

Coles Myer is scheduled to issue its full-year sales today, with analysts on average expecting a rise in 2001-02 turnover of between 8.5 per cent and 9.5 per cent to around $26 billion.

While the headline result appears strong, there are grave concerns that the retailer's general merchandise business has engaged in end-of-year discounting a little too willingly at the expense of margins.

Some are worried that even food and liquor sales have slowed.

Mr Wilkinson said David Jones had resisted the pressure to discount, which he described as an ``industry cancer".

A three-year program to introduce more than 150 new brands has meant upwards of two-thirds of David Jones's apparel stock is not broadly available in other department stores.

``It allows us to limit competitive activity to the commodity end of our business," he said.

At the same time, David Jones has reduced shrinkage, or theft, and keep inventories, particularly aged stock, below benchmark.

Those factors and unexpectedly strong sales prompted the company to raise its forecast range for 2001-02 net profit to between $12.5 million and $13.5 million, up by some $1.5 million.

Before significant items to cover restructuring, earnings are now expected to tally $34.5 million to $35.5 million.

Annual sales were 7.8 per cent higher at $1.67 billion.

On a like-for-like basis, sales for the core department store business were up 3.1 per cent for the 12 months, but 5.7 per cent for the fourth quarter.

But what Mr Wilkinson described as an ``outstanding" result was merely ``encouraging" in the eyes of others.

``The upgrade takes the result towards the upper end of where market expectations were," said ABN Amro retail analyst Richard Cahill.

``In light of the gloom and doom that has surrounded a lot of retail commentary in the last few months, it is pretty good."