Private equity firm Anchorage Capital Partners is exclusively carrying out due diligence on David Jones, with plans to offer just $200 million for the department store giant.
In the eight years since South African Woolworths Holdings bought David Jones for A$2.1 billion, the once grand department store has been all but gutted.
The department store had five CEOs over six years, and endured three years of straight losses, which only ended last year due to a 70.4 million JobKeeper handout.
It embarked upon a badly-conceived dual-branding exercise with BP service stations, shut the majority of its loss-making food halls, and trimmed overall floor space by 7 per cent.
The company also offloaded the flagship Sydney CBD Elizabeth St building for $510 million, and the menswear stores in its Bourke St building, in the Melbourne CBD, for $121 million.
Woolworths CEO Roy Bagattini said last month: “David Jones is now debt free, self-funding, and has a clear roadmap to improving profitability.”
Given the Bourke Street flagship is worth the $250 million it was estimated at a year ago, Anchorage will be effectively getting a major piece of real estate in the Melbourne CBD for a song, and valuing the entire David Jones department store enterprise as worth less than zero.
This $200 million figure is not entirely unexpected. Allegro Funds had initially earmarked $400 million for a potential bid, but lowered this to $200 million after doing due diligence.
New accounts lodged with ASIC by Osiris Holdings, the foreign-owned private company that houses the department store, shows net profits fell to just $14.5 million in FY22.
This marks an 82.7 per cent decline from the previous year’s $84.3 million.
This accounting is rather at odds with Woolworths Holdings own reporting in August, which showed adjusted operating profits at David Jones had declined by just 0.6 per cent in FY22, to $83.7 million.
No doubt these real accounts, plus the eleven-year retail leases the over 40 David Jones locations are saddled with are a big factor in why the business is worth so little.
