The decline of once mighty department store chain David Jones, which opened with the mission to sell ‘the best and most exclusive goods’ in Australia 184 years ago, took another sad turn this week.
There is growing speculation that the aspirational retailer could be unloaded at a fire sale-like price before Christmas.
It is expected to be sold by its South African owner Woolworths Holdings, to equity firm Anchorage Capital Partners, for as little as $125million.
Once mighty department store chain David Jones looks set to be unloaded for a fire sale price with its South African owners understood to have had enough of the Australian industry. Pictured, frenzied shoppers rush into the store on Boxing Day 2007
Australia’s first David Jones boutique store closed in March 2020 due to Covid-19 and remained closed 18 months later. The Barangaroo, Sydney, store opened in November 2016 (pictured) amid much fanfare
David Jones’ golden period, from the early 2000s until the pandemic struck, was studded with a parade of glamorous international models acting as ambassadors and strutting its catwalks. Pictured, Jesinta Franklin (left) and Miranda Kerr (right)
While David Jones is yet to confirm any potential sale, executives from Woolworths Holdings flew to Australia last weekend to give the go-ahead for new ownership, the AFR reported.
Considering that Woolworth Holdings – which is unrelated to the Woolworths Group that owns 1,086 Australian supermarkets – paid $2.1billion for the famous retailer in 2014, it would be a shockingly low sale price.
It is understood to be a fraction of the price brokered for David Jones less than a decade ago.
What’s even more shocking is the decline of a business that had transformed itself from an iconic Australian brand into a world-class retailer – before its abrupt fall from grace.
Woolworths Holdings, which also owns Country Road, made over $1billion in write-downs due to losses across its businesses during the course of the Covid-19 pandemic and is understood to be focused on repaying its debts.
Shelves inside David Jones Barangaroo boutique were completely empty in December 2021
David Jones’s original George Street store in Sydney (at right) in the 1880s
David Jones opened with the mission to sell ‘the best and most exclusive goods’ in Australia 184 years ago
David Jones’ decline started through the closure of several stores in recent years, including the failure of its much-anticipated boutique outlet at Barangaroo in Sydney, which opened in 2016.
In December, 2021 shelves at the Barangaroo outlet were stripped of products, display cases were empty and screens blocked most windows.
The cracks started appearing with the closure of David Jones’ Fortitude Valley store in Brisbane in January, 2020 only three years after it opened.
Then in July, 2020, David Jones announced the sale of the iconic Melbourne menswear, home and food building on Bourke Street.
In June, 2022 it shut its only store in Wellington, New Zealand.
The closures were accompanied by a noticeable slip in the emporium’s usual impeccable standards of customer service and store design, at least according to some shoppers.
‘The fitting rooms are dirty, dated, filthy carpet, hole the size of a plate in the ceiling and a dirty band-aid on the floor,’ one disappointed Sydney customer wrote in September, 2022.
The closures were a clear sign of a fall from grace for the chain that grew from three stores in 1959 to 48 by 2019, and had positioned itself since 2013 as ‘synonymous with style and progress’.
The early to mid 2000s was a golden period for DJs, with the retailer appointing several international models, including Lauren Hutton, Miranda Kerr, Megan Gale and Jessica Gomes as brand ambassadors.
Its catwalk shows, too, boasted a generation of modelling superstars from Linda Evangelista to Jesinta Franklin (nee Campbell) and Gigi Hadid.
A modest-but-busy David Jones’ Market St store in Sydney in the early 1980s
A David Jones food court looked very different in 1968 (pictured above) than it has in recent years
In 2000, the rebuilt Adelaide Central Plaza won a top global award as the best newly completed store in the world.
DJs had achieved its ambition to become truly world class.
Fast forward to Christmas 2022, usually a frantic but positive time for David Jones, and its South African owners are reportedly not feeling festive.
They are understood to have had enough and want out of Australia’s department store industry.
They are believed to view the David Jones purchase as ‘a disaster’ that never came close to repaying the initial investment.
That is despite sales recovering strongly in the five months to November 2022, increasing by 55 per cent to ‘pre-Covid levels’.
The company had appointed investment bank UBS to review the capital structure and property portfolio of the 48 Australian stores, as it drowned in $500million of debt.
So what went wrong for the business once seen as Australia’s leading big-store leading brand?
Customers enter the the David Jones city store in the early hours of the morning at the start of Boxing Day sales on December 26, 2013
Model Megan Gale (right) gestures after officially opening Stage One of the David Jones Bourke Street Mall Store in 2009
Several reports say it has struggled under its new owners.
Woolworths Holdings made expensive mistakes, including the decision to open and expand dozens of David Jones food halls, The Australian reported.
Another was the punt it took on trying to make DJs-branded foods available in BP service stations.
The gamble lost more than $15million in one year before it was all but shut down down in 2021.
Woolworths Holdings chief executive Roy Bagattini said the move was flawed from the outset and a ‘cut and paste’ job from South Africa that didn’t work in Australia.
When the company began to hunt for a buyer, it is understood billionaire Myer shareholder Solomon Lew looked closely at David Jones but walked away after examining the accounts.
The main reason analysts have pointed to for David Jones’ dramatic loss in value is a slump in sales during the Covid pandemic.
Up to the start of May, 2020, its sales were down 36 per cent.
Things didn’t get much better from there. DJ’s bottom line net profit was just $14.5m in 2022, compared to $84.3m in 2021 – an 82.7 per cent collapse.
Even putting the pandemic aside, David Jones was the victim of a seismic shift in consumer habits.
Online sales have been steadily increasing as a share of total Australian retail sales since the first decade of the 2000s.
David Jones’ decision to expanded its famous food courts did not repay the substantial investment
But during the pandemic online sales surged, to almost 20 per cent of total sales.
Bricks-and-mortar stores suffered the most and that was seriously bad news for David Jones, a retailer that prided itself on an unrivalled in-store experience.
In 2021, 80 per cent of Australians shopped online, spending $62.3billion and driving the online share of total retail sales to a record 19.3 per cent.
The amount spent online is expected to double in the next five years.
However, all is not completely lost for David Jones.
The chain’s jewel, its flagship store in Melbourne’s Bourke Street Mall – valued at about $250 million in its own right – will not be included in the deal.
Also, current chief executive Scott Fyfe is set to stay on and fight for the revival of the chain, which still has 43 stores.
The prospective new owners Anchorage are said to have been impressed by Mr Fyfe’s leadership team and indicated it will back them.
Reinvestment in the stores is on the cards too, with equal focus on in-store and online shopping.
Mr Bagattini claimed the chain was in ‘better shape than it had been in some time’.
‘David Jones is now debt free, self-funding, and has a clear road map to improving profitability, and as such, we are in a favourable position to explore all future options in respect of this business, and how best to further unlock value for the group and our shareholders,’ he said in the Woolworths Holdings’ annual report.