By Rhiannon Zanetic

Major retailers David Jones (DJS) and Myer will focus on cost cutting as they approach the release of full-year results later this month, according to the Australian.

According to Deutsche retail analyst, Alexi Baker-McLenna, the reduction of costs is expected to be a “common theme for both results”.

"The two retailers are pretty lean operations and there's not a lot of fat left, but they will still try to cut costs," Baker-McLenna said.

Deutsche said that both DJs and Myer had forecast a reduction in the cost of doing business, down 33 basis points to 27.8% and by 140 basis points to 28.6% respectively.

Baker-McLenna predicts DJs will report a full-year net profit after tax of $171 million, an increase of 10 %, and earnings before interest and tax (EBIT) to rise by 11% to $251m. This in line with the retailer's forecast of profit after tax to grow by 8-10%.

Deutsche has forecast Myer will report underlying net profit after tax of $165 million, an increase of 52% with EBIT growing by 14% to reach $269 million, also in line with the retailer’s expected EBIT of $265-$272 million.

"Myer's reported NPAT is reduced by $97m due to one-off costs associated with its listing," Baker-McLennan said. 

Resilient gross margins expected

Baker-McLenna also said the company expect gross margins to be “resilient”, despite industry discounting “reflecting the benefit from supplier negotiations at DJs and the high-margin private label program at Myer."

Both chains forecast a "relatively subdued start to first-half 2011 before trading improves over the Christmas period and into second half of 2011". DJs said it did not expect consumers to be back in "full swing" until financial year 2012.

"Retail trading conditions are still tough, but things have stabilised and are not as volatile. Most retailers are expecting a better Christmas this year after a weak Christmas over the past two years," Baker-McLennan said.

Very few surprises are expected at the announcement of results, as both retail chains recently delivered guidance at the release of their fourth-quarter sales.

"With both department stores reporting quarterly sales and recently providing earnings guidance, we expect few surprises for financial year 2010 season," she said.

Myer will report its full-year results on September 16, 2010 and David Jones on September 22, 2010.