DJ's for window shoppers only

The announcement of a 5.2% rise in third quarter comparable store sales figures, including a 'special event' sale that lasted for a month, does give existing shareholders some comfort. But DJ's aren't out of the woods just yet. Underlying sales may have increased by an encouraging 2.7% but the possibility of the wharfies dispute holding up merchandise over the Mother's Day period means the group still has some way to go before investors can shop with confidence.

Prospects are brightening however, when looking out one to two years. Over the remainder of 1998 the company should complete its current initiatives in store divestment and changes in the merchandise range. The much-heralded new computer management information systems should be in place allowing superior staff rostering and productivity as well as delivering an interface with automatic stock replenishment. But relying on IT projects to enhance a company's prospects is a risky business - more than half fail to deliver on their promises - so a 'wait-and-see' approach is prudent.

If all goes well, this time next year will reveal a leaner and more efficient retailer delivering, finally, stronger earnings growth. In the meantime, restructuring costs will continue to hamper profitability and a repeat of the most recent sales growth figures is essential to restore some confidence.

Unlike DJ's, Woolworths and Coles Myer are attractive for their supermarkets earnings - the fastest growing and most consistently profitable sub-sector of retailing. Although DJS may look good value on paper, there's a risk to earnings estimates - and we all know what the danger of investor impatience for improved results can bring. It's a bit like that old retailing truism - 'you get what you pay for'. HOLD.