David Jones’ interim result and commentary again confirmed why it is important to look at what companies and their boards do, not just what they say in their commentaries.
David Jones reported a 10.2% rise in interim earnings and lifted dividend, and Myer lifted earnings by around 11% and will pay a solid dividend; but the contrast with Myer’s interim result was dramatic.
David Jones’ net profit rose to a record interim figure of $100.46 million for the 26 weeks to January 23 from $91.2 million in the prior corresponding period, the company told the ASX yesterday.
The shares dipped after the report to a day’s low of $5.05, and then recovered in afternoon trading to end at $5.13.
That dragged Myer shares 2c higher to $3.53, well under the $4.10 issue price.
There was more confidence at DJs: the higher dividend of 12c a share is a record for an interim payout.
That was a key difference, but also one that tells the state of thinking at the two department store chains.
Myer is hunkering down, David Jones upbeat and seeing growth in sales and earnings in the coming year, and into 2011.
David Jones said the higher dividend "reflects the strength of the Company’s balance sheet, its strong cashflows, low debt levels, as well as its ability to fully fund its future Capex program.
"It is these factors that give the Board the confidence to declare an all time high 1H10 dividend."
David Jones also reaffirmed profit growth guidance of between 5% and 10% this year and next.
At Myer there was lots of talk about the uncertain outlook and a lowered sales forecast.
"We remain cautious about the outlook for the second half of FY10. We are entering a period during which we cycle the second and more significant Federal Government Stimulus package, further interest rate rises are widely anticipated, and the consumer remains wary," Myer CEO, Bernie Brooks said in the profit announcement a week ago.
"Against this backdrop, and despite the sales trend for the first six weeks of the second half 2010 being ahead of the 2% growth reported in the first half 2010, we anticipate total sales growth in the second half of the year to be in the range of 0 to 2% and the full year to be up 1 to 2%."
Myer is paying shareholders an interim dividend of 10.5c a share.
Revenue rose 2% to $1.8 billion. Earnings before interest and tax (EBIT) were up 11.9% to $181 million, in line with the company’s guidance.
Myer was confident of achieving its forecast for 11% growth in 2011 earnings before interest and tax to $261 million.
David Jones chief executive Mark McInnes said in the statement the company reaffirmed its profit after tax growth forecast of between 5% and 10% for fiscal 2010 and 2011, as well as for the second half of fiscal 2010.
"We note that to achieve the top end of this guidance the retail recovery will have to be in full swing, something Access Economics does not forecast until 2012," Mr McInnes said in the statement.
Mr McInnes said, “Despite a very competitive environment in 1H10, with heavy promotional activity by retailers, we are pleased to report that our Gross profit Margin hit an alltime high of 40.0% and our EBIT Margin was 13.5%, up 90 basis points when compared to 1H09.
“Our ability to deliver these strong results including a record high Profit After Tax of $100.5 million (up 10.2% on 1H09) is testament to the strength of our Business Model and its ability to generate shareholder growth throughout the peaks and troughs of the economic cycle.
“We have net debt of less than $100 million and all of our existing assets are of the highest quality and are supported by strong cashflows reflecting the strong focus the Company has placed since 2003 on return on capital,” Mr McInnes said.
