David Jones Struggles, Stores To Be Sold, Network Shrunk, & Borrowings Extended
David Jones is looking at more asset sales in an effort to reduce debt after a shocker start to 2020, parent Company Woolworths said that they will close some of its 48 stores and sell property to reduce its $464 million debt pile following a plunge in sales during the coronavirus shutdown.
The bright light on the horizon for the big retailers who recently cut back on CE and appliance brands is that, Woolworths the South African owners of the brand have won a waiver from its lenders on its debt covenants, the group has also loaned David Jones $75m as a short term loan until they restructure.
The lending banks have granted the requisite suspension of covenant testing and the process with the bondholders has commenced and is expected to be concluded by the end of the financial year, Woolworths Holdings said.
Woolworths recently appointed investment bank UBS to run the rule over its David Jones property portfolio in order to reduce debt, which could lead to the sale of its flagship stores, following a strong double-digit decline in sales amid the COVID-19 crisis.
Late yesterday the Company issued a trading update which revealed that sales at David Jones parent Company Country Road Group, which includes popular retail brands such as Country Road, Mimco and Witchery, slumped by 50 per cent through the worst weeks of the coronavirus outbreak.
In a trading update provided to the Johannesburg Stock Exchange by Woolworths Holdings, it also announced a number of measures to bolster its Australian businesses in the wake of the health and economic crisis triggered by the pandemic, including discussions with landlords to lower rents.
The Company said that discussions with Australasian landlords are underway in relation to an accelerated restructure of the David Jones network of stores/locations and reduction in floor space.
Woolworths Holdings chief executive Roy Bagattini said this recent update reflects the tough and unprecedented trading conditions that have dramatically impacted performance across the retail sector globally.
“Throughout this period, our group has taken proactive and immediate action to ensure the safety of our customers and employees, while optimising trade across all our businesses.
“Notwithstanding the significant challenges we currently face as a business, we are well placed to respond rapidly and effectively to changing customer dynamics and capture the market opportunities that arise.”
In Melbourne, the Company has moved to sell the Bourke Street Menswear building, contracts have been exchanged between David Jones and a purchaser who is believed to be an overseas property investor.
The sale price achieved is in line with expectations and final settlement is anticipated before the end of July 2020 following the fulfilment of customary conditions precedent the Company announced.
One bright note is that online sales remain strong, with the Company reporting growth of 19 per cent in the second half to date.