David Jones shares have been placed in a trading halt as the department store chain exercises caution about corporate disclosure rules before releasing its first half results.
Market watchers expect the upmarket retail chain to post a 15 to 20 per cent fall in net profit when it reports its latest earnings results on Wednesday.
But while David Jones has previously flagged the profit drop, a media report on Monday suggesting the results would feature a fall in credit card earnings appeared to rattle its nerves.
David Jones requested its shares be placed in a trading halt until Wednesday amid speculation that it was preparing to confirm a 50 per cent fall in future credit card earnings.
Credit card earnings make up about one fifth of the retailer’s earnings and come from a joint venture with American Express.
It’s understood David Jones received legal advice to take a cautious approach on the matter prior to a routine board meeting to discuss the results on Tuesday.
David Jones’ caution comes after Leighton Holdings received a $300,000 wrap over the knuckles from the corporate regulator over a $900 million plus earnings downgrade in 2011 that plunged it into a sharp and unexpected loss.
David Jones said it would outline a strategic plan when it released its latest earnings results.
“While the company does not believe that there has been any leak of confidential information by the company and that the speculation is based on publicly available information, the company considers a trading halt to be appropriate in the circumstances,” David Jones said in a statement.
An analyst, who did not want to be named, said David Jones had effectively announced it would provide details on what would happen to the financial services business when its agreement with Amex expires next year.
“It does seem a little bit cautious to us to go into a trading halt given the company has said that they don’t believe anything has been leaked, but clearly if something was leaked then it is a reasonable thing to do,” he said.
David Jones in February re-affirmed its first half profit guidance of a 15-20 per cent fall after posting total sales revenue of $598.5 million for the second quarter.
But while its share price is expected to react positively to a result which meets expectations, investors are not getting too excited.
OptionsXpress market analyst Ben Le Brun said David Jones was facing the same retail headwinds as rival Myer, which unveiled a near 20 per cent drop in first half profit last Thursday.
“Expectations going into this result are most definitely depressed,” he said.
“But, when they come off such a low base, all DJs will really need to do is come somewhere in line with ball-park expectations and there’ll be some upside in the stock.”
