David Jones curbs costs, boosts profit

SYDNEY - Australia's second-largest department store, David Jones, is forecasting that second-half earnings will rise as much as 30 per cent after cutting inventory costs and posting better-than-expected sales of clothing and cosmetics.

It said net income would rise to between A$24.5 million ($19 million) and A$26.5 million in the six months ending July 29, from A$20.5 million a year earlier.

Chief executive officer Mark McInnes lowered the amount of inventory the company ordered and controlled costs to boost profit margins in expectation of a slowdown in consumer spending as borrowing costs rise.

He is also expanding the 34-store chain with three new outlets in as many years as he takes advantage of a change in ownership of market leader Myer.

"It has been able to perform very well in an environment when people's hip-pockets have been hit," said Phillip Shamieh, managing director of Wise-Owl.com, a stock research firm. "It's a great sign of management that they have been able to factor in the potential downside and are looking to the future."

The company said full-year earnings were expected to rise as much as 19 per cent to A$81 million.

"Sales have been stronger than expected, our gross margins are at the top end of our target range, and our inventory and cost of doing business have been well managed," McInnes said.

- BLOOMBERG