David Jones lifts profit 15pc

SYDNEY - David Jones, Australia's most profitable department store, said first-half earnings rose 15 per cent after cutting costs and boosting credit card profits.

Net income rose to A$54.5 million ($63 million), or A12c a share in the six months ended January 28 from A$47.5 million, or A10c a share a year earlier, David Jones said yesterday.

Chief executive Mark McInnes, who built earnings by cutting costs and attracting customers with exclusive fashions, faces increased competition after Texas Pacific Group's Asian buyout fund last week agreed to buy the larger Myer chain.

McInnes is refurbishing his Sydney and Melbourne city stores, adding more brands and planning new outlets to win customers.

"They are managing things well in the consumer slowdown," said Richard Wallace, of Wallace Funds Management in Sydney. "But the market is also starting to get concerned about the implications of the Myer sale, which could create much more of a competitor."

David Jones shares fell A9c, or 3 per cent, to A$2.95. The stock reached a record A$3.04 on Tuesday and has gained 27 per cent this year.

Coles Myer agreed to sell Myer and its flagship Melbourne property for A$1.4 billion to focus on its larger supermarket and discount store divisions.

Texas Pacific, whose department store investments include Debenhams in the UK and Neiman Marcus in the US, wants Myer to target richer consumers with a wider range of exclusive fashions from Australian designers, an area led by David Jones.

After failing to buy as many as 12 of the Myer sites, McInnes is in talks with landlords about new stores in "high value" locations.

- BLOOMBERG