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David Jones and Myer will join hands, Morgan Stanley predicts

Yahoo!7 Finance

They are Australia’s flagship retailers and bitter rivals for more than 100 years. But over the last few months, both Myer and David Jones have seen sales flag and profits plummet.

Is it time for the fierce competitors to join hands?

While it may seem like a highly unlikely alliance, a report by investment bank Morgan Stanley says a Myer-David Jones merger could be one of the surprise moves of 2013.

Quoted by the Herald Sun, Morgan Stanley's 10 Potential Surprises for 2013 report predicts it could be time for the two stores to join forces and conquer with the market together.

Also read: Australia's iconic brands losing millions

And while neither chain is believed to have formally considered or spoken about the idea, Morgan Stanley believes there are reasons strong enough for this to happen.

A Morgan Stanley analyst says a Myer and David Jones tie-up could result in joint savings of nearly $90 million with the need for competitive discounting  reduced.

David Jones' and Myer's troubles

David Jones's full-year profit plummeted by a huge 40 per cent and Myer reported a 13 per cent drop in its profits too.

In 2012, there was a reports that David Jones was planning to offload its flagship department stores, despite having its four premium properties in central Sydney and Melbourne valued by experts.

DJs later refuted the claims and revealed the four stores - on Elizabeth and Market streets in Sydney and Melbourne's Bourke Street - were worth more than $600 million as it posted a 40 per cent plunge in full year profit ($101 million).

In December 2012, Myer said it would optimise its store network, which includes closing poor performers in Fremantle and Canberra.

Insisting its store network remains at the core of the business despite the competition from online retailers, Myer reported a full-year dip in profit of about 13 per cent to $139.4 million.

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