David Jones is struggling so badly its parent company thinks it’s worth only two thirds of the $2.1 billion it bought it for just four years ago.
South African retail giant Woolworths wrote down the company’s value by $712.5 million after profits fell 30 per cent last financial year.
The vast majority of the write-down was to its intangible assets and brand power, which it valued at $1.5 billion in June but now thinks are substantially less.
David Jones is struggling so badly its parent company thinks it’s worth only two thirds of the $2.1 billion it bought it for just four years ago (Jesinta Campbell pictured at fashion launch)
The vast majority of the writedown was to its goodwill and brands, which it valued at $1.5 billion in June but now thinks are substantially less (David Jones CEO John Dixon pictured left)
‘This reflects the cyclical downturn and structural changes that have impacted performance across the Australian retail sector,’ Woolworths said.
‘The impact of these changes has been exacerbated by poor or delayed execution in certain key initiatives.’
The write-down followed a 3.3 per cent drop in sales in the six months to December 24, though revenue improved 0.6 per cent in the last six weeks of that.
Writing down David Jones so much was expected to drag the whole Woolworths group’s earnings per share down well into the negative.
However, the company said it remained ‘committed to the transformation of David Jones, the resolution of execution issues and will continue to invest in the business’.
Writing down David Jones so much was expected to drag the whole Woolworths group’s earnings per share down well into the negative (Jessica Gomes pictured on catwalk)
Poor performance by its private label fashion lines was blamed for some of the sales drop, which Woolworths chief executive Ian Moir (pictured) admitted were badly launched
Poor performance by its private label fashion lines was blamed for some of the sales drop, which Woolworths chief executive Ian Moir admitted were badly launched.
‘We got stuff wrong and we got it badly wrong,’ he told financial analysts a year ago.
‘The stuff we got wrong was executional stuff – our systems didn’t speak to each other, we didn’t know where stock was, it arrived late, then it arrived in the wrong mix and we spent too much launching brands when the product wasn’t there.
‘We’ve slowed the whole thing down, we’ve sorted out execution issues… and we’re getting there.’
Mr Moir insisted the overall plan to creating private label fashion lines was sound and not the mistake some called it.
‘It’s going to take longer than we originally planned … part of that is because of our stuff-ups, the way we slowed down, but the strategy is right,’ he said.
The writedown followed a 3.3 per cent drop in sales in the six months to December 24, though revenue improved 0.6 per cent in the last six weeks of that
Woolworths said on Wednesday it hoped the fashion lines’ performance would be improved by their management being moved to Australia.
Writing down David Jones was expected to put pressure on Myer to do the same, by $986 million including $465 million in goodwill and $421 million in brand name.
Myer’s share price fell 50 per cent in the past year and 19 per cent in December after an unprecedented 5 per cent fall in sales in the first two weeks of the month.
Both department stores have been hit by the recent collapse of brands like Oroton, Marcs, David Lawrence, Herringbone, Rhodes & Beckett, and Payless Shoes.