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Evan Lucas, Research Analyst, IG

David Jones is the second major retailer to release its first-half earning inside a week, and at first blush its report seems to suggest it is holding up despite severe macro headwinds.

As an overall result, the figures are broadly in-line with expectations, but unlike Myer, which beat expectations and had in-line earnings with the corresponding period, DJS’s have missed this metric.

NPAT fell 13.5% compared to the corresponding period to $73.5 million, as its Future Strategic Direction Plan bit into profits. Earnings per share were also weak, down 15% to 13.9 cents, with cash flows the biggest disappointment, lower by 36% to $104 million, adding pressure to the balance sheet.

However, it’s not all bad news for investors. The dividend was ahead of expectations at ten cents and is very much in-line with the first half 2012. Sales were only 0.7% off the year before, at a tick over $1 billion dollars.

With $25 million heading to capex, the good news coming out of this report is that the Future Strategic Direction Plan was implanted in the first half of the calendar year. The omni channel is operational, and with 288% growth seen over Q1 to Q2, the plan would appear to be working. DJS is still a long way behind its peers and more work will be needed, so expect this to continue to impact the bottom line, though the drop in profit can be excused if this programme works.

With retail sales and expectations likely to remain clouded over the remainder of 2013, DJS like MYR has not provided guidance. On a comparative, short-term view with its peer, MYR’s current earnings metrics would probably see it leading DJS on the short term. I would expect DJS to leg higher today on this result as some short positions unwind.