Analysts are preparing for a few surprises with the announcement of both Myer and David Jones' first half results imminent. 

Department store giants David Jones and Myer Holdings are likely to have driven first half profit growth on cost reductions and higher margins.

The retailers are widely expected to report profit numbers within upgraded guidance given last month and despite reporting flat second quarter sales.

Deutsche Bank retail analysts Alexi Baker-McLennan, Matthew Iser and Paul van Meurs said in a research note that with first half numbers "largely pre-announced" for both retailers, they expected few surprises in headline numbers.

The Bank forecasts Myer to have earnings before interest and tax (EBIT) growth of 10 per cent to $203 million, in line with management guidance.

Upmarket retailer David Jones is also likely to be within guidance, with net profit growth of 10 per cent to $100 million.

Deutsche analysts said that both results are likely to be characterised by rising gross margins and cost reductions.

They anticipate gross margin gains to be driven by supplier renegotiations for David Jones and in the case of Myer, higher sales of products with its own brands.

Cost reductions are forecast to be lower than financial year 2005 levels for David Jones or financial year 2007 levels for Myer.

Both stores would also benefit from allocating more space to higher margin categories such apparel, cosmetics, accessories in their new and refurbished stores, they said.

David Jones CEO Mark McInnes recently said the business was in "terrific shape".

The department store chain sharply increased its earnings guidance in February saying it expected growth of five to 10 per cent, up from zero to five per cent. It also flagged higher dividends.

Rival Myer almost doubled its guidance for first half earnings before interest and tax (EBIT) recently, despite a disappointing Christmas trading period on increased discounting in the sector.

Myer boss Bernie Brookes said it would continue to discount "aggressively" to lift sales over the next six months, and expects more sales growth in fiscal 2011 upon the opening of new stores.

Myer is now foreseeing growth of more than 10 per cent compared to the 5.6 per cent forecast in its prospectus prior to its float on the Australian Securities Exchange (ASX) last November.

The analysts noted that they saw minimal risk around the first half forecasts given that both companies recently reiterated guidance.

Myer will report its profit on Thursday, March 11 and David Jones releases its results on March 17.

©2010AAP