David Jones boss Roy Bagattini hails turnaround as retailer roars back into profit

Upmarket department store David Jones has posted an almost fourfold increase in its profitability during 2021, despite the shockwaves of Covid-19.

David Jones’ adjusted earnings hit $84m for fiscal 2021, up from an adjusted $22m in 2020. Picture: NCA NewsWire/Damian Shaw

Upmarket department store David Jones has posted an almost fourfold increase in its profitability during 2021 despite the shockwaves running through its retail stores due to Covid-19, with many shoppers pivoting to online.

Roy Bagattini, the boss of the South African company that owns David Jones, Woolworths Holdings, lauded the return to strong profitability for his Australian store, given that not too long ago things were not looking good for the 183-year-old department store.

“Things were looking bleak. It had $500m to $600m in debt, etc, and today is a very different day for David Jones. We are very pleased that we have come as far as we have in what is a relatively short space of time,” Mr Bagattini told The Australian from his office in South Africa.

“The last 12 months have been pivotal in setting that business up for what potentially it can accomplish. We are very optimistic about that.”

The fast turnaround has seen Woolworths Holdings rip tens of millions of dollars of costs out of the business, shut down most of its loss-making food halls and cut floor space by as much as 7 per cent as it aims to reduce store space by 20 per cent in the next few years.

Its online platform has bolstered sales when shops were closed due to lockdowns, as its physical stores did suffer from low foot traffic.

David Jones’ adjusted earnings hit $84m for fiscal 2021, up from an adjusted $22m in 2020 when the emergence of the pandemic began to crunch sales.

David Jones recorded a loss of $33m in 2020 before adjusting for recent accounting treatments of leases.

The inability of Australians to travel overseas saw some discretionary spending head into David Jones as well its stable of fashion chains under the Country Road Group banner.

David Jones was forced to book losses of $15m linked to its failed food hall venture, which has now been mostly slated for closure, while the department store picked up roughly $39m in rent relief and wage subsidies from the government.

“Stronger economic fundamentals, improved consumer confidence and restrictions on international travel supported inward-focused consumption and buoyed retail spend,” Woolworths said.

“This was despite the intermittent snap lockdowns across major cities and an extended three-month lockdown in the state of Victoria during the first half of the current year and a further lockdown in the last quarter. Footfall in central business districts and airport locations remains well below pre Covid-19 levels.”

At David Jones turnover and concession sales over the period increased by 2.3 per cent and by 0.9 per cent in comparable stores, with second-half sales up by 17.1 per cent. Online sales increased by 24.4 per cent and contributed 17.3 per cent to total sales for the current year.

At the Country Road Group, which takes in Country Road, Mimco, Witchery, Politix and Trenery, profit more than doubled, from $60m to $155m, a gain of 158.3 per cent.

The retailer said the trading outlook in Australia was uncertain and would be impacted by further Covid-19 waves and resulting lockdowns and restrictions, as well as the slow pace of vaccination in both regions. “In Australia, current lockdowns are significantly curtailing trade in our brick-and-mortar stores, while in South Africa, we are in the midst of the third wave while the after-effects of recent civil unrest are also likely to be felt for some time.”

David Jones is adding new labels to its collection, signing a deal to launch the underwear and shapewear SKIMS, the new brand owned by US reality TV superstar Kim Kardashian, which will be exclusive for the department store in Australia. There has already been strong demand from customers waitlisted to buy the clothing range.

Originally published as David Jones boss Roy Bagattini hails turnaround as retailer roars back into profit