David Jones boosts IT budget after profit drop

David Jones has committed to investing in technology and an “omni-channel” retail strategy after posting a 19.6 percent profit drop for the six months to 28 January.

The retailer today reported a half-year profit $85 million after tax, compared to $105.7 million in the previous corresponding period.

David Jones’ chief executive officer Paul Zahra said it faced growing costs and competition from online retailers while consumers’ discretionary spending waned.

Technology was a key focus of David Jones’ “three-point strategy”, unveiled today to demonstrate its plan to grow amid current challenges.

In a presentation to investors (pdf), Zahra outlined plans to “transform David Jones into an omni-channel retailer”, noting that similar “bricks and clicks” retailers like Victoria’s Secret, Sears and Nordstrom were “the winners overseas”.

Last month, David Jones’ group executive of retail services, Tony Karp, told iTnews that it had established a team of 100 technologists – including staff from outsourcer IBM – to develop an omni-channel platform.

The project was expected to conclude by Christmas, delivering a new online store, transactional mobile store, native mobile applications and a social commerce store.

Zahra said today that it would also integrate and improve customers’ ability to interact with David Jones online, and increase the retailer’s online product offerings from 9000 to 90,000.

The company pledged to spend a “large component” of its projected $70 million to $80 million in capital expenditure this financial year on online retail.

From 2013, David Jones planned to develop a technology-enabled ‘store of the future’ format, leverage customer analytics, and introduce a fully integrated gift registry and improved online store.

Zahra told investors that the omni-channel project now involved about 200 people, including a digital marketing team, internal IT and operations resources and IBM contractors.

He also highlighted improvements to David Jones point-of-sales, retail, merchandise planning, workforce management and traffic analytics systems, describing a need to invest in technology to enable the company to transform and generate efficiencies.

Besides the omni-channel strategy, David Jones also planned to open six new full-line stores in “high-value” locations and a number of other smaller format stores, as well as improving the efficiency of its processes, stores and financial services products.

The company noted that its “future strategic direction” had been formulated on the basis that current macro-economic conditions would continue and labour, occupancy and utilities costs would increase.

“The ‘transformation’ component of the company’s future strategic direction will require significant investment over the next 18 months,” it stated.

“This investment will have short-term financial implications for the company in 2H12 and 1H13.

“As and when the macro-economic environment improves, we expect the company will be well-placed to leverage the sales growth upside and thereby positively impact [profit] growth.”

David Jones shares closed at $2.43 on the Australian Securities Exchange today, down 10.99 percent from when it requested a trading halt on Friday.