David Jones

David Jones’ operating margins—which exceeded 12% in 2010—have looked too good to be true for a while. It’s partly why we’ve been sceptical about the stock, having recommended you Sell back in 2009 and Avoid in Ill winds hit JB Hi-Fi, Myer and DJs on 15 Jul 11 (Avoid – $3.20). Since then the stock has tumbled 26%. The reason is that the surging profits produced under former chief executive Mark McInnes were the result of unsustainable cost cutting and under-investment. These strategies are coming home to roost, with current chief executive Paul Zahra announcing new investments in staff...

David Jones’ operating margins—which exceeded 12% in 2010—have looked too good to be true for a while. It’s partly why we’ve been sceptical about the stock, having recommended you Sell back in 2009 and Avoid in Ill winds hit JB Hi-Fi, Myer and DJs on 15 Jul 11 (Avoid – $3.20). Since then the stock has tumbled 26%.

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