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EXCLUSIVE: Myer & David Jones Placed On Credit Watch

One of the worlds’ leading trade indemnity groups has placed a credit watch on David Jones and Myer.

In a recent report the group who underwrite the risk on stock being supplied to retailers claims that “all” department stores around the world including US and UK retailers are exposed.

The move to tighten their risk of exposure to department store trading is set to push up the cost of trade indemnity policies for suppliers who may have to rethink their supply agreements.

Recently both Myer and David Jones have struggled to deliver any form of growth despite David Jones being praised for their investment in consumer electronics and appliances.

Myer’s deteriorating trading performance means the department store retailer, is getting precariously close to its banking covenant thresholds.

Myer’s net assets must stay above $500m and at the end of the year’s first half had fallen to $580m after an almost $1 billion asset write down at the last full-year.

At the weekend the Comp any forced all head office staff to take an additional day off during the long weekend.

Less leave liability reduces Myer’s total liabilities and so helps keep total net assets as high as possible.

All this comes as Myer’s market value sits at about $340m. That places further pressure on management and its auditors to consider another asset write down, which would further challenge the covenant.

In May, Myer announced a loss of almost half a billion dollars for the first of the financial year.

And it wasn’t pretty at David Jones either. In January, the department store was written down by more than $700 million.

Brian Walker, the CEO and founder of consulting and advisory company Retail Doctor Group said recently “retail is going through a lot of change and transformation”.

“Australian retail for many years was isolated from the rest of the worlds and now, it is much less so,” he says.

“We have big global retail brands, actually we have 20 percent of the world’s top 200 global retailers here now.”

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