“Opportune Time” To Ditch David Jones, Investors Say
Investors in South Africa are publicly calling for Woolworths Holdings to rid itself of the once mighty department store giant David Jones.
Chris Reddy, fund manager at All Weather Capital, told the South African Times that selling David Jones would allow Woolworths to get its FBH division “firing on all cylinders”.
He repeated these comments to The Australian, adding that a recent upswing in fortune and the reopening of retail makes now an “opportune time” to sell – a process that’s been “on the cards for a while”.
“Given that the business is showing an improvement in operating earnings, coupled with lockdowns lifting in Australia, it may be an opportune time for an exit.”“The department store models are under pressure globally. While the company has been able to dispose of some of the properties which was part of the case for buying David Jones in 2014, many of the synergies mentioned at the time have not played out.”
David Jones has had five CEOs in the last six years, and endured three years of straight losses, which only ended in 2021 thanks to a 70.4 million JobKeeper handout.
It embarked upon an ill-fated dual-branding exercise with BP service stations (pictured above), closed the majority of its loss-making food halls, and trimmed overall floor space by 7 per cent.
The company also “disposed of” the flagship Sydney CBD Elizabeth St building (below) for $510 million, and the Bourke St building in the Melbourne CBD for $121 million.
Despite these cost-cutting measures, David Jones’ adjusted operating profit crashed 45 per cent over the last six months of 2021, to just $31 million. The retailer posted a 9.2 per cent fall in sales, with lockdowns putting its bricks-and-mortar stores out of action for three months.
The start of 2022 has seen an upswing, which is prompting the calls for a quick sale.
“A deal has been expected by the market,” Reddy told The Australian.
”But likely delayed given Covid and its impact on the ability to complete a due diligence as well as Woolworths waiting for the business to get back to pre-Covid levels in order to extract as much value on the sale.”
He also confirmed that private equity firm Permira and Indian retail conglomerate Reliance Retail were among those showing interest in David Jones.