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David Jones Value Slashed By Third, $712M Writedown

Citing Australia’s tough retail climate, South African-based Woolworths Holdings has written down its investment in David Jones by a third, forcing the retailer to swallow a $712.5 million non-cash impairment charge to its carrying value.

Woolworth Holdings reportedly informed the Johannesburg Stock Exchange that changes reflected “the cyclical downturn and structural changes that have impacted performance across the Australian retail sector”.

The spokesperson added “poor execution” was also an influencing factor:

“In addition this impairment has been exacerbated by delays and poor execution in certain of our key initiatives at David Jones”.

Woolworth Holdings reportedly held a $2.1 billion investment in David Jones, which it acquired in 2014.

The spokesperson states the “vast majority” of the recent write-down concerns goodwill, which in June last year the company put at $1.5 billion.

The company states Woolworths’ board will stay committed to David Jones’ “transformation”, and will continue to invest:

“These conditions have not altered our focus on the transformation of David Jones and we are committed to the resolution of these execution issues and our ongoing investment plans for the business”

“We have recently implemented new merchandising and customer relationship systems, and will continue to make significant investments in both our online and in-store offerings, including the renovation of the Elizabeth Street Flagship store (in Sydney) and the growing David Jones food business.

“These initiatives will prepare our business for the retail landscape of the future while building on the great heritage of our brand”.

David Jones’ latest trading update shows sales for the second half of last year were down 3.3% on a comparable basis. Woolworths Holdings is scheduled to release David Jones’ half-yearly results towards the end of February.

The news comes as rival department store Myer issued a profit downgrade in December.

Many investors are preparing themselves for less than stellar December and Christmas retail sales reports, as the upcoming reporting season nears.

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