David Jones

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ASX AND MEDIA RELEASE
For Immediate Distribution

Page 1 of 13
21 March 2012

DAVID JONES ANNOUNCES ITS FUTURE STRATEGIC DIRECTION
DAVID JONES HAS MANY EXISTING STRENGTHS: It has a distinctive positioning in the Australian market, a loyal customer base, a strong service ethic, a profitable and well positioned store portfolio, a strong Balance Sheet, robust cashflows and a high dividend payout ratio - all of which position the Company well to leverage the many opportunities that exist for future growth outlined below.

DESPITE ITS STRENGTHS THE COMPANY FACES CHALLENGES
• • • Structural Changes – the internet is globalising & changing retailing; Macro Economic Headwinds –retail sales have been flat and rents, labour, utilities & financing costs are increasing; Challenging Australian Consumer Credit Markets - the Company’s card portfolio is exposed to prevailing weak discretionary retail spending. This could result in a halving of EBIT contribution from this business in FY14 when the alliance with American Express converts to a share of underlying profits. Transformation: The Company is in the process of transforming: • into an Omni Channel Retailer (OCR) modelled on international department store best practice. The Company is investing in technology and realigning its processes & structures. The Company will increase its online SKUs from 9,000 to 90,000 before Christmas 2012. Its OCR offering will integrate the shopping experience across sales channels (i.e. physical stores, web-store, mobile applications, contact centre, social commerce platforms) to enable customers to choose how and when they engage with David Jones, supported by integration and investment in its marketing channels (traditional and digital); • its Customer Service & Engagement proposition by further investing in customer service & experiences that will differentiate it from competing retailers; • its Pricing by managing (with its suppliers) the transition to global Cost Price Harmonisation over time; • its Technology capabilities by increasing its investment & resources in this area with projects such as a new POS system, new traffic analytics, a new end-to-end OCR solution platform, new customer analytic capabilities, new merchandise planning system & a new staff rostering & scheduling system; and • its Management Composition to ensure its skill base is aligned to its future strategic direction. To date 200 new dedicated (internal & external) staff have been added across the Company’s IT, Digital and

DAVID JONES WILL ADDRESS THESE CHALLENGES & GROW VIA A “3 POINT STRATEGY” 1.

Operations divisions.
2. Growing its Store Network: The Company is planning to: • Open 6 New Stores in high value locations, all of which are signed up with the landlords & will increase the Company’s store foot print to 42 stores nationally. Two of these, Highpoint (Vic) and Indooroopilly (Qld) have commenced construction and are due to open for trade in FY 13 & FY14 respectively. These 2 stores are expected to generate approximately $10 million p.a. in incremental EBIT. The remaining 4 stores are expected to generate approximately $20 million p.a. of incremental EBIT when they open. • Open several Smaller Format Stores (based on the Company’s successful Claremont Quarter store) which are expected to deliver at least $2 million each p.a. of incremental EBIT. 3. Strengthening the Core Business: The Company is implementing initiatives that will: • continue its track record of offering the best national and international brands; • reduce its CODB by approximately $30 mil over 3 years to offset some of the expected cost increases; • restore its GP Margins to a long term sustainable range of 39.5% - 40%; • generate incremental Sales and EBIT through Refurbishments; and • consolidate & grow the revenue generated from the Company’s Financial Services business.

FUNDING: Implementation of the Company’s Strategy will require Capex of approximately $70-$80 million p.a. This...
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