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Australia's David Jones First-Half Profit Jumps 30%

Upmarket Australian retailer David Jones on Wednesday reported a 30.4% surge in first-half profits, buoyed by a strong Christmas season, and reaffirmed its outlook for this year and next.

Gross margins improved and costs declined as the retailer pursued cost efficiencies, and David Jones has also received a boost from changes at rival department store Myer.

The company said net profit before one-offs for the six months to Jan. 31 rose to A$71.1 million (US$57.3 million) from A$54.5 million a year ago.

That was at the top end of the company's forecast of a 25-30% increase and above market estimates of a A$70.5 million profit, according to a Reuters survey of seven analysts.

David Jones chief executive Mark McInnes said the first seven weeks of the third quarter were broadly in line with the second quarter, when sales were up 8.9%.

Because of a tough comparison with last year, he reiterated the company's conservative forecast that second-half sales will be flat to up 1%, while second-half profit will be up 8.5-13.5%.

With three new stores due to open in the next 12 months, David Jones reaffirmed its forecast of 5-10% profit growth for the financial year 2007/08. The retailer currently has 36 stores around Australia.

Department store sales have strengthened in recent months at the expense of specialty clothing stores, and David Jones has also benefited from a restructuring in the department store sector after Myer was sold last year to a private equity group led by TPG-Newbridge.

"As a result of the (industry) restructure, opportunities have arisen and continue to arise, that David Jones has been able to capitalize on," McInnes said, citing store expansion and new brands.

David Jones shares have jumped 54% since mid-2006, compared with a 16% increase in the broader market. Its shares rose 2% on Tuesday on hopes of a strong result.