DJs a better bet than Myer

They are both chronic underperformers. But if you had to choose between the two department stores, David Jones at least owns its stores.

Paul Zahra finally has one up on Bernie Brookes.

Whereas Brookes was punished for delivering a particularly ordinary Myer (MYR) result a couple of weeks back, Zahra's mildly better performance at David Jones (DJS) this morning was greeted with nods of approval and a decent rally in the emporium's lacklustre share price.

Perhaps the thinking was that it just couldn't get any worse. For the past 12 months, David Jones has delivered an unending tale of woe, underperforming the equally dismal Myer.

From $2.70 this time last year, the retailer has piled on gains of about 10%. And that includes this morning's 5% rally that took the stock to within a whisker of $3.

Myer has risen about 35% during the same period although it is never wise to mention this in the presence of anyone who forked out $4.10 in the float, given it now is trading at $2.70.

Both companies were caught completely off-guard by the rise of internet shopping, which just happened to coincide with serious shift in consumer spending in the wake of the financial crisis and a suddenly strong Australian dollar that made offshore purchases ridiculously cheap.

Both have struggled to formulate a decent strategy in the new world of retail and neither has addressed the difficult future they face that will require a fundamental shift in trading strategy with smaller shops, reduced floor inventory and perhaps even the grim reality that underperforming stores in marginal areas will need to go.

After delivering a 6% slide in net earnings to $95.2 million – on an underlying basis earnings went nowhere with a marginal rise to $101.6 million – Zahra's speech to the faithful hardly inspired confidence.

The future remained challenging, he proffered. But the company was well placed to benefit  from a lift in consumer sentiment.

So there you have it. As with Myer, the future is beyond anyone's control. Just like the past.

If you had to search for a difference between the pair, it is this: David Jones still has an enormously valuable property portfolio. Myer's previous owners, private equity group Texas Pacific, flogged its high street real estate and ran off with the cash.

That makes David Jones a more attractive takeover target.

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