JD 'in a tight spot'

Johannesburg – Despite another disappointing set of results, the executive chairperson of furniture retailer JD Group remains adamant that the company's restructuring exercise has placed it in a better position for future growth.        

David Sussman was commenting after JD released its interim results to end-February 2010 on Monday. These showed the group struggled to raise sales during the period, despite interest rate cuts expected to bring relief to consumers.

The weak performance was largely due to the group's retail division, which experienced a poor festive season. Although this is generally a buoyant period for retailers, JD reported an 8% fall in sales compared with the previous corresponding period.

In the interim results, JD reported a 1% growth in revenue to R6.8bn. Headline earnings per share were 140.2c from a loss of 19c last year, while the group declared an interim dividend of 70c.     

"You've got to look at it [the results] in the context of what happened last year. Over 900 000 people lost their jobs - that tells you people were more concerned about further job losses," said Sussman in an interview.

Reuben Beelders, a portfolio manager at Gryphon Asset Management, said the results were to be expected as figures released by Statistics SA for late 2009 showed that furniture sales remained weak. 

"The markets were warned [through a trading update earlier in the month]. It's a business that's in a difficult spot at the moment," said Beelders.

He said the big thing to watch was whether JD would be able to raise sales as conditions start to improve.

Announcing the 2009 financial results, JD said it had completed a restructuring process which effectively separated furniture from the credit division, and was now a focused furniture retailer.

Sussman said the focus has resulted in significant reduction in debtors’ costs, which came down by 19% to R454m.

Another positive outcome was improvement in the cash retail division consisting of Incredible Connection and Hi-Fi Corporation, which delivered a 7.5% growth in revenue. 

However, JD has struggled to increase sales in its credit retailing division - whose brands include Morkels, Jusua Doore and Bradlows - as the higher end customer base continues to battle with heavy interest-bearing debt.

"I'm really pleased with the way the business is going. We now have two focused businesses," said Sussman.

On the restructuring exercise, Beelders said it was still early days to assess whether it was effective, though the drop in debtors’ costs was a positive sign.        

Sussman said trading in the first four months of 2010 was encouraging.