Premium Appliance & CE Brands Set To Be Hit By Closure Of 10 David Jones Stores
David Jones is set close up to 10 upmarket stores in a move that is set to impact brands and distributors selling appliances and consumer electronics.
In the appliance market where David Jones has established a reputation for premium appliances brands such as Breville who have 80 products ranged at the retailer, Smeg and Delonghi are set to be impacted.
In the consumer electronics market brands such as Bang & Olufsen whose sales at specialist dealers are struggling, along with Bose and Loewe TV’s are set to face fewer sales as the South African owners Woolworths takes an axe to their Australian department store operation.
Roy Bagattini,the CEO of David Jones’ South African parent company Woolworths Holdings the company has “too many stores” and has stepped up plans to shut some and shrink its network by 20 per cent as losses are deepening in the COVID-19 crisis.
Speaking to the Age, he claimed that Australia was overstored” with David Jones stores and that and customers could expect a number of closures in the next 24 months.
“There’s no doubt we have too many stores for what I think our business purpose is in Australia,” he said.
It’s expected that the initial cut will see 10 stores shut with some tipped to be CBD locations as consumers move to shopping in regional locations.
Bagattini said the COVID-19 crisis meant he now wants those plans accelerated and completed in the next two years.
“We’ve got to get there much quicker, so we have to accelerate our way through that. We have been engaged with all 12 of our landlords, and we’ve been having very good discussions and we’re making good progress,” he said.
In the last financial report David Jones reported an operating loss of $33 million, a massive decline from the previous year’s $37 million profit. Total sales fell 6.4 per cent to $2.06 billion, and comparable sales declined 6.9 per cent.
The company chose to trade through the initial COVID-19 lockdowns in March and April despite many of its retail rivals closing their doors.
This meant David Jones’ sales hit was not as pronounced as rival department store Myer’s 15.8 per cent fall, though both retailers suffered significant hits to their earnings.
Mr Bagattini admitted the retail environment for department stores globally was challenging.
“Our responsibility is to ensure that it is relevant in today’s context, and that’s through the whole brand environment, the store look and feel, the experiences, the services that all once made department stores a great place to shop,” he said.
“Unfortunately, globally some of these large-format department stores have stepped away from these things and that’s why they’re in trouble. So that’s really where we’ve got to get to for David Jones.”
Sales for the first 10 weeks of the 2021 financial year continued to be poor for both David Jones and CRG, down 11.5 per cent and 8.8 per cent respectively, which their South African parent attributed to the current Victorian lockdowns.
Mr Bagattini said the state’s strict lockdown measures were “a little painful” for the retailer and he was hoping trade could resume on October 26.
Along with renegotiating its leases, David Jones is in the midst of disposing of its significant property portfolio.
The Company is also pressing ahead with plans to sell off its remaining Sydney and Melbourne CBD properties, which are estimated to be worth between $600 million and $750 million, to reduce debt, cut costs and improve gross margins, while attempting to restore top-line sales growth.
The Company expected profits to return to growth in 2021, when the $440 million refurbishment of the flagship Elizabeth Street store was completed and the retailer stopped paying rent on its Market Street store, which was sold in 2015.
Mr Bagattini was reluctant to give guidance or forecast a return to profitability for David Jones but said the retailer should do “better” this year.
“We are doing a number of other things across the business to get it into good shape … taking costs out, and negotiating with landlords and so on,” he said. “All of that should bode well in terms of turning out a better performance than last year.”