David Jones (DJS) has a maintained Neutral recommendation on the company shares with a 12 month price target of $4.23 from Australian stock analyst Macquarie Research Equities.

David Jones (DJS): There’s No Other Store Like David Jones

David Jones reported an increase in first half profit by 25% and an interim dividend of 11 cents per share, on the back of buoyant Christmas sales. David Jones stock gained circa 4% to $3.70 during this morning’s trade on the back of the better than expected first half 2008 report, particularly when taking into account consumer sentiment.

Impact
• First half sales increased by 9.5% to $1.1billion and EBIT increased by 23.7% to $136.8million – split between department stores ($118.4 million) and financial services ($18.4 million)
• Regardless of consumer spending slowing in the second half, David Jones expects to maintain profit growth in line with expectations of 8-13%.

Action
• DJS understands its customers, brand image, competitors and capabilities and announced a strategic plan this month to open new stores and expand sales of high-margin goods to help maintain profit in a weaker economy. DJS main rival is Myer which has 60 stores compared to DJS’ 36.
• DJS has positioned itself as Australia’s luxury department store, distinguishing the store from its competitors by successfully targeting the “high value” and “younger” demographics.
• DJS expects an increase in receivables due to the launch of a general purpose store card in partnership with American Express in time for the all-important Christmas period.
• $400 million capex spend budgeted for new stores and refurbishments.

Recommendation
• Macquarie Research Equities (MRE) maintains a Neutral recommendation on the stock with a 12 month price target of $4.23.