By Patrick Avenell, Current.com.au

The fortunes of department store rivals David Jones and Myer could not be more different, with the Macquarie Securities Group saying DJs is outperforming whilst Myer is lagging well behind market expectations.

In separate reports obtained by Current.com.au, Macquarie consumer analyst Rob Blythe runs his rule over the two leading large format retailers. He says that whilst DJs is clearly winning the battle, Myer does have some advantages over its longtime foe.

“DJs is a unique business in that despite significant disruption to household consumption growth and retail trade in particular over FY09-FY11, they have the ability to produce profit growth,” Blythe said. “There are some factors unique to DJs that contribute to profit growth despite sales declines: ownership of the Sydney and Melbourne stores, which avoids fixed annual rental increase; and the credit card business.”

Things have no being so rosy for Myer during the overall soft trading conditions, however, with Blythe highlighting an adjusted net profit after tax decline of 5.2 per cent. Blythe said Myer had three options to turn this around: reduce the cost of doing business, improve retail margins and increase comparative store sales.

The Macquarie report also provides an interesting insight into the Myer One card program. This loyalty and incentive card has proven very popular, with Myer able to convert otherwise smaller voucher sales into much higher, more profitable transactions. Furthermore, more than two-thirds of all Myer sales are now transacted with card holders.

“Members of the Myer One loyalty program represent the majority of Myer’s sales,” reads the report. “As at 1H11, some 69 per cent of sales were made to loyalty card holders.”

“In contrast, David Jones has reported that [around] 25 per cent of sales are made to store card holders. Customers are becoming increasingly loyal as retailers offer greater rewards and benefits. Myer notes that a Myer One card holder who receives a gift voucher typically spends well in excess (average 3.3 times) of the voucher’s denomination in store.”

This article first appeared on Curre