Allegro Funds Management, a Company that specialises in retail store turn arounds has walked away from buying struggling retailer David Jones with questions now being asked as to whether the business is actually saleable or is the future a merged Myer and David Jones business.

Woolworths South Africa own David Jones have been desperate to offload the struggling business especially as consumers are shopping locally as opposed to CBD areas where department stores are primarily located.

Back in 2019 Allegro Funds Management acquired Steinhoff International’s Australasian subsidy Greenlit Brands and their attempts to buy David Jones was seen as a lifeline for the department store.

However, problems with leases are believed to have resulted in the investment Company offering only half of an initial $400M offer after due diligence.

Also walking away from the national retailer was Anchorage Capital Partners who also had problems with the state of the business that is facing pressure on several fronts.

The Australian newspaper claims that some observers believe that the problems lie with lease commitments, and that extracting itself from leases on loss-making stores is costly with landlords refusing to move in negotiations.

Back in March 2022 David Jones posted a 9.2 per cent fall in first half sales, and profits slid steeply with trade significantly hampered by COVID-19 restrictions.

Adjusted operating profit slid 45 per cent to $31 million, returning an operating margin of 3.2 per cent in the half-year period ending December 26.

Currently David Jones’ is punting on increased foot traffic and higher sales at its departments stores however, a drop in consumer confidence and rising interest rates has become a problem as the Reserve Bank tips further inflationary pressure.

Woolworths Holdings chief executive Roy Bagattini told The Australian Financial Review at the time that the upmarket department store had a tough first half when sales and profits slid.

He said at the time “We’re very much looking forward to that footfall returning to the CBD areas. We’re also seeing a marginal, but gradually increasing level of tourism which has been missing for the last couple of years,” he said.

Foot traffic at the Company’s flagship store in Sydney, is still down 20 per cent to 30 per cent on a weekly basis.

Bagattini said that “Customers are spending “notably more time in the store, and the average ticket value, the average sort of amount that they spend has increased quite substantially.”

Market analysts believe the logic for any buyer of David Jones or rival Myer is to bring the two businesses together.

Woolworths South Africa looked at buying Myer to merge with David Jones, as DataRoom reported in 2017.