David Jones (ASX:DJS) has forecast a sharp decline in 1H12 profit, on expectations of continued weakness in the retail market.
The company is forecasting profit for the half of just $84.5 million to $90 million – at least 15% and up to 20% lower than in 1H11.
CEO Paul Zahra said the forecast has been cut due a to an “unprecedented...dramatic and rapid deterioration of trading conditions in 4Q11.”
The deterioration led to an estimated 9-12% decline in 2H11 profit.
As a result, the company now expects profit for FY11 to be between $167.7 million and $169.7 million – a decline of between 0.5% and 2% on FY10.
The company had been forecasting a 5% increase in 2H11 profit, based on trading conditions in May.
The profit warning led to an 18.16% decline in the DJS share price during Thursday's trading to $3.200 – a two-year low.
Zahra said David Jones would take a cautious approach to 1H12, but still intended to continue investing in its online and financial services business, point of sales system and store refurbishments.
The company will also maintain its policy of paying out dividends worth not less than 85% of post-tax profit.
“We are confident that our business model will allow us to trade through these difficult times,” Zahra said.
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