DJs cuts costs via supplier competition

Upmarket department store David Jones Ltd says it has been able to reduce costs
since 2004, and will continue to do so, by getting its suppliers to compete for all
contracts.
The retailer said its first half gross profit (GP) margin of 40 per cent, the
highest it's ever been, reflected the renegotiation of 2700 supplier contracts.
Cost of doing business (CODB) percentage for the first half was 28.4 per cent, an
improvement of 30 basis points on the 28.7 per cent for the same period the year
before.
Chief executive Mark McInnes said CODB had reduced every half since 2004.
"We use the competitive intensity in industry structure in our external contracts to
maximise the cost benefit to David Jones - that's a deliberate strategy," Mr McInnes
told media on Wednesday.
He said the company's renegotiation of its lifts and escalators contract was an
example of cost savings.
"We spent the last five years letting all of those [lift and escalator] contracts
elapse and only signing deals to one date in 2009 so we could go out to tender with
that entire portfolio," he said.
David Jones appointed Schindler as its supplier and expects "material annual savings".
The retailer said money spent on lifts and escalators for the next five year
contract is expected to be half what was spent in the preceding five year period.
Mr McInnes said the department store's tender for banking, telecommunications, media
buying and catalogue printing were up for renegotiation and all the major players
were competing for its contracts.
On top of the cost savings, David Jones said the reallocation of space to high
margin categories and the increase in department store exclusive brands helped boost
profit by 10.2 per cent.
The department store chain lifted first-half net profit to $100.46 million for the
26 weeks to January 23, in line with expectation.