David Jones is considering a sale of its flagship Sydney and Melbourne CBD properties, as profit slumped amid a worsening environment for traditional retail.
Net profits in the year to July dropped 39.9 per cent to $101.1 million, down from $168.1 million, the company said this morning, in line with earlier guidance.
Chief executive Paul Zahra said the result "reflects the difficult trading environment during the year as well as the investment we have made in the second half of 2012 implementing our Future Strategic Direction Plan".
As part of the review, the company said it was considering the sale of its four flagship properties in the Sydney and Melbourne CBDs, estimated to be worth $612 million, but the company will update the market on its plans in six months.
Consultants Cushman & Wakefield had been appointed to ‘‘investigate opportunities to unlock and enhance the value of its property portfolio’’, the company said in a statement alongside annual results today.
David Jones’s flagship stores on Elizabeth Street and Market Street in Sydney and on Bourke Street in Melbourne have 85,000 square meters of floor space between them and could rent for $39 million a year, the company said.
David Jones has struggled in recent years with a confluence of challenges, including faltering consumer confidence, the strength of the dollar which has made online shopping overseas more attractive, as well as the globalisation of the industry in which consumers increasing compare and shop across a variety of outlets instead of relying on a single chain. David Jones, like Myer, also pay higher wages relative to their global peers.
The upmarket retailer has previously outlined an ambitious plan to expand shopping options across online and mobile devices, with a goal of increasing the number of items available online from 9000 to 90,000 by March of 2013.
David Jones said it had made "good progress" in lowering the prices that suppliers charge to bring them closer to global prices, a part of its broad strategy to remain viable in customers' eyes.
"The price reductions achieve to data are pleasing, however they do raise the issue of deflationary pressure on our business," said Mr Zahra.