While department store operator, Myer is re-opening most of its stores this week, and yet rival David Jones is looking to close many of its 48 outlets across the country.
It’s not that Myer is a financial or sales success story, far from it but judging from the trading update yesterday in South Africa from parent, Woolworths Holdings, David Jones’s is slip-sliding its way deeper into trouble.
Woolworths has previously singaled plans to cut 25% of its floor space across its 48 outlets by 2025, but this is no being accelerated and instead of shrinking store sizes, actual outlets will be closed – much in the way Wesfarmers plans to cut Target and Woolworths is hacking into Big W.
The pandemic and lockdowns have hit the Australian chains hard – most David Jones stores remained open in the lockdown but sales still dropped by 35.8% across April and May.
CRG and its chains saw a 50.4% slump in sales because they were shut.
Online sales took up some slack rising by 20% at David Jones, but that wasn’t at the pace of other chains such as Myer, Kathmandu, and City Chic.
In the update, Woolworths Holdings told investors it had kicked off a number of strategic initiatives to strengthen the business in the pandemic and revitalise its struggling Australian brands.
Woolworths (not to be confused with the Australia supermarket chain) says it has appointed investment bank UBS to review the capital structure and property portfolio of its Australian entities David Jones and the Country Road Group (CRG), which owns Country Road, Witchery, Trenery, Mimco, and Politix.
UBS will look at restructuring borrowings and review the property holdings to find ways to pay off the nearly $500 million in debt owed by David Jones and CRG, it said. Some $464 million of that debt is held by David Jones, so it is clear the solution is to fix that black hole by filling it with debt repayments, which is why the store closures will happen.
Woolworths says it has sold the David Jones Menswear store in Melbourne’s Bourke Street for a price said to be close to the $500 million valuation. UBS will also look at options for its women’s wear stores in Bourke Street Melbourne and in Elizabeth Street in Sydney.
And like other retailers such as Premier Investments and Kathmandu, Woolworths wants its shopping centre and other landlords to come to the party with reworked and lower rental agreements.