David Jones sells menswear store as banks offer a leg-up to retailers
As David Jones and its sister fashion house Country Road Group won a reprieve from their lenders, the department store has struck a deal to sell its Bourke St menswear store.
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Department store chain David Jones has struck a deal to sell its menswear store in Bourke St Mall despite the bleak conditions buffeting the retail sector.
DJs has swapped contracts with a buyer and expects to have the deal wrapped up within months, the retailer’s parent company has revealed.
“The sale price achieved is in line with expectations and final settlement is anticipated before the end of July,” Woolworths Holdings said in a statement.
The buyer of the store, which was expected to fetch more than $100 million, has not been named.
Woolworths, which is not related to the Australian retailer of the same name, announced last year it was selling the store, on the south side of the retail strip, and would consolidate its Bourke St operations in its store on the north side.
That store will be refurbished.
The update came as David Jones and sister retailer Country Road Group won a reprieve from their lenders following a sale slump amid the fallout from the coronavirus pandemic.
Lenders to the up-market department store chain and sister fashion house Country Road Group have agreed to a waiver on terms in their contracts.
The banks will not apply covenant tests to their loans this year, giving the prominent retailers breathing space at a critical juncture.
It follows a dramatic fall in turnover at David Jones and Country Road Group — owner of the Mimco, Politix, Trenery and Witchery brands along with its namesake label — amid the coronavirus pandemic.
In a trading update on Wednesday, parent company Woolworths Holdings said that over the eight weeks to the end of April, sales at David Jones tumbled 35.8 per cent compared with the same period last year.
That was despite the fact David Jones, unlike rival Myer, did not close its large-format stores as social restrictions were ushered in across Australia to help slow the spread of COVID-19.
At Country Road Group, sales plunged 50.4 per cent. Woolworths yesterday noted Country Road Group had closed all its stores as restrictions were rolled out.
It had done so “given the challenge of maintaining social distancing protocols across their smaller-store formats”, the company said.
Woolworths, which is not related to the Australian retailer of the same name, has agreed to give Melbourne-based David Jones and Country Road Group a loan of $75 million.
That funding was conditional on lenders agreeing to suspend covenant testing, the group said.
It has also made a provision for a further loan of up to $25 million.
“The lending banks have granted the requisite suspension of covenant testing,” Woolworths said in trading update.
Businesses who breach lending covenants are potentially at risk of collapse.
Such covenants are terms in contracts that often revolve around levels of turnover or profitability.
The consequences for breaching them vary, but in an extreme scenario, a bank could demand immediate repayment of the outstanding loan balance or call in receivers.
There is no suggestion David Jones or Country Road Group were facing such a scenario.
In its trading update on Wednesday, Woolworths said it was also taking other steps to boost the balance sheet of its Australian businesses, including restructuring their borrowings.
It said it was also in talks with landlords to accelerate the restructure of David Jones’ store network and reduce floor space.
The company revealed David Jones had struck a deal to sell its menswear store on the south side of Bourke Street Mall. Contracts had been swapped with “the preferred purchaser”, Woolworths said.
It did not name the buyer or reveal the sale price, but market speculation had the price north of $100 million.
“The sale price achieved is in line with expectations and final settlement is anticipated before the end of July,” Woolworths said in its statement.
Woolworths also said on Wednesday that it would carry out a “full review” of its property portfolio across David Jones and Country Road Group and had hired investment bank UBS Australia to help.
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