Aussie retail ‘in recession’ says DJ’s owner

The South African company behind one of Australia’s biggest names is warning our retail sector has a troubling prognosis, as it wiped more than $400 million from the department store’s value.

Australia’s retail sector is “in recession” as “sustained and unprecedented economic pressures” take a painful toll, the parent company of David Jones has warned.

South African group Woolworths Holdings has issued the troubling prognosis as it takes another deep writedown on the value of the up-market department store chain.

Woolworths announced that it was cutting another $437.4 million from the value it puts on the Aussie retailer, and the hit would drag it into the red.

The company bought David Jones for $2.1 billion in 2014 but has now burnt through more than half of that value. It now puts the value of the David Jones chain at $965 million.

Last month 120 jobs were made redundant across David Jones. Picture: Carla Gottgens/Bloomberg

In a statement to the Johannesburg stock exchange this afternoon, Woolworths said it was expecting to report a loss for the past financial year after taking the writedown on DJs.

A strategic review of the David Jones store portfolio had also identified “stores with onerous leases”, the company said, and as a result it was budgeting for another $22.4 million hit.

Under the watch of Woolworths chief Ian Moir, who led the purchase of David Jones five years ago, the value of the department store chain has been torched as poor retail conditions weigh on its performance.

Woolworths, which is not related to its Australian namesake, last year booked an impairment of $712 million on the value of the department store chain.

The latest writedown means more than $1.1 billion has been stripped from David Jones’ value in two years.

Woolworths said the latest impairment was a result of the “economic headwinds” and the “accelerated structural changes affecting the Australian retail sector”.

The performance of the business had also fallen short of expectations, it said.

“This writedown reflects sustained and unprecedented economic pressures and structural changes in the Australian market,” a Woolworths spokesman said.

“The retail sector in Australia is currently in recession and the Australian economy has slowed to its weakest level since the global financial crisis in 2009.

“Operationally, our strategic initiatives position David Jones for the retail environment of the future.”

Our digital and online offering is expanding rapidly. We remain focused on reducing costs and reducing store space across our footprint.”

More than $1.1 billion has been stripped from David Jones’ value in two years. Picture: AAP Image/Mick Tsikas

Last month, David Jones announced it was making 120 jobs redundant across its stores and headquarters.

Woolworths also last month told the stock exchange in South Africa that David Jones had suffered a third consecutive year of shrinking like-for-like store sales.

Like-for-like sales, which strip out the impact of shops that have opened or closed, had slipped 0.1 per cent, the group said.

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The Woolworths spokesman said that among initiatives to bolster the chain’s fortunes, the “implementation of new merchandising and planning systems and the launch and rollout of the David Jones Rewards loyalty program are complete”.

“The Elizabeth Street Flagship store refurbishment is on track with key womenswear floors opening this month, and the exclusivity of our Country Road Group brands within David Jones will take effect from September,” he said.

“These initiatives align us closely with the changing needs and preferences of our customers.”

The Australian