It seems Australian shoppers are not letting a small rise in unemployment or sluggish times in the broader economy get in the way of a good spend.

It may be the impact of the stimulus packages and the lower interest rates, but the rebound in spending reported in May and June also coincided with the solid recovery in consumer confidence surveys.

Now David Jones has sharply boosted its second half 2009 profit forecast from an unsteady 0%-5% estimate that it had held to since January (with negative sales growth) to a dramatic “20%-30%” lift in today’s statement.

Retailers have been able to maintain employment levels because of the increased traffic and business and the improved second half profit will mean higher profits in 2010 than previously thought and better prospects for holding or creating jobs.

David Jones’ main competitor, Myer, earlier this month upgraded its outlook:

“Myer now expects sales for the second half of the year to be down around 1% compared to the same period last year. First half sales were down 3.7%. This contrasts with previous guidance of a 5 per cent decline in comparable sales. Myer expects profits (Earnings Before Interest and Tax (EBIT), Net Profit After Tax (NPAT) and Earnings Per Share (EPS)) for the full year to show a “mid to high single digit” increase on the same period last year, having previously given guidance that profits would be ‘similar’ to FY08.”

That was similar to the upgrade from JB Hi-Fi around the same time:

“JB Hi-Fi expects to exceed average analysts expectations for the full year FY09. After continued strong sales, solid margins and cost control in the 2nd half of FY09 the company expects its profit for the year ending 30 June 2009 to be circa $92 million, a 41% increase on the prior year NPAT of $65.1 million. (Previous guidance was “comfortable with average analysts’ expectations of $87.1 million”). Sales are forecast to be circa $2.3 billion or a 26% increase on the prior year. Comparable store sales growth for the 11 months ended 31 May 2009 was 10.6%.”

Both were solid upgrades, but nothing like the surge forecast by David Jones.

Retail sales growth generally has been modest but positive so far this year: they rose 0.3% in April and May’s figures are out tomorrow (along with building approvals).

In the statement this morning, David Jones CEO, Mark McInnes said: “As stated at the time of our 3Q09 Sales announcement, trading in April was broadly flat on last year. In May and June this trend improved and we have been trading ahead of the corresponding months last year on both a Total and Like-for-Like basis.

“May and June reflects a significant positive shift in our trading performance and demonstrates the resilience of the David Jones customer and brand strategy. History has shown that we are ‘first in and first out’ of a downturn.

“Whilst we still have to trade through July to complete the fourth quarter and we are not planning to repeat the clearance of excess inventory undertaken in July 2008, our trading to date has been pleasing and well above our expectations.

“Based on our Company’s tightly managed costs, the better than expected Sales (to date) in 4Q09 is expected to flow through to PAT and the Company has therefore increased its PAT Guidance to: 20% to 30% growth for 2H09; and 8% to 12% growth for FY09.”

After that report the first thing David Jones should do is sack Access Economics as the basis for making decisions and get a group that better understands retailing and takes notice of what Government spending stimulus packages and Reserve Bank rate cuts can do.

Back in January, David Jones downgraded its sales and profit expectations for the rest of 2009 and 2010 financial years and justified it it:

“Access Economics believes we are experiencing a ‘rolling downturn’ which will continue in the second half of calendar 2009 with no sign of improvement until 2010.”

DJ’s CEP, Mark McInnes repeated that Access forecast a number of times in the next few months to make sure the market understood the reasons for the slump and how the company had prepared for it by cutting inventories and costs.