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Majority Stakeholder In David Jones Calls It A ‘Poor Acquisition’

The investment management company Allan Gray, which recently bought a 20% stake in David Jones’ parent company Woolworths Holdings, has called the firm’s purchase of the Australian retailer a poor decision.

“Woolworths paid $2.1 billion for David Jones, which has turned out to be a very poor acquisition given the pressure department stores find themselves under globally and the tough Australian economy,” Duncan Artus, Portfolio Manager at Allan Gray, told The Sydney Morning Herald.

Woolworths Holdings, which is based in South Africa, bought David Jones in 2014.

“Most of the value is in the South African operations, including an excellent food business, and Country Road, which operates in both Australia and South Africa,” Artus said.

Last week Woolworths Holdings outlined its plans to improve the profitability of David Jones by closing some of its stores and selling $1 billion in property assets.

Its investor announcement stated: “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.”
Allan Gray has expressed support for this course of action. “Once the effects of the lockdowns and pandemic have subsided we will have a far clearer idea of the success of the interventions and the difference Woolworths’ new CEO [Roy Bagattini] has made.”

David Jones has been hit hard by the COVID-19 lockdowns. In the eight weeks to end-April sales and concession sales declined by 35.8%. However, the department store has already noted a positive uplift in footfall and a subsequent “encouraging sales performance”.

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