Value to tumble from David Jones as tough market upsets revitilisation

THE South African owner of David Jones will slash its value by more than $700 million as traditional department stores struggle to attract shoppers in a changing retail market.

THE South African owner of David Jones will slash its value by more than $700 million as traditional department stores struggle to attract shoppers in a changing retail market.

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Woolworths Holdings has told investors it will take a $712.5 million non-cash impairment against the book value of David Jones at its half-year profit report due next month.

Woolworths shelled out $2.1 billion buying the nation’s oldest department store in 2014, meaning it will write off close to one-third of its value.

The retail group on Thursday said the writedown reflected “tough and unprecedented trading conditions, a cyclical downturn and structural changes that have impacted performance across the Australian retail sector”.

“The impact of these changes has been exacerbated by poor or delayed execution in certain key initiatives,” the company said in a statement.

Woolworths Holdings, owner of David Jones, will slash its value by more than $700 million.

“These conditions have not altered our focus on the transformation of David Jones and we are committed to the resolution of these execution issues and our ongoing investment plans for the business.”

The writedown is a blow to Woolworths, which has invested heavily in David Jones in recent years, overhauling its private-label clothing range, introducing new merchandising and customer relationship systems, and renovating its Sydney flagship store.

David Jones is also spending money on rolling out a gourmet food offering, which it believes will provide a lucrative revenue stream and serve as a key attraction for bringing people into its stores.

Woolworths chief Ian Moir has previously acknowledged mistakes were made as David Jones revamped its private-label ranges.

Woolworths, which also owns local brands Country Road, Trenery, Witchery, Politix and Mimco, warned it may be forced to write down the value of David Jones when it unveiled a decline in sales earlier this month. Sales at the department store chain fell 3.8 per cent over the six months to December 24 compared with the same period a year ago.

David Jones chairman Ian Moir. Picture: Mark Wilson

Like-for-like sales, which strip out the impact of stores opening and closing, fell 3.3 per cent during a period that covers the busy Christmas period.

Woolworths, which is not related to the local supermarket giant, will release its half-year profit report for David Jones on February 22.

The writedown at David Jones will raise further questions about the carrying value of intangible assets such as goodwill and brands at rival Myer.

Analysts have raised red flags over the issue, pointing out Myer has close to $1 billion in intangible assets in its books, but its market capitalisation is only around $500 million.

Australia’s corporate watchdog is understood to be probing Myer over the matter.

Myer reshuffled its executive ranks last week in a shake-up that saw its chief financial officer leave the company.

It is also battling its largest shareholder — retail billionaire Solomon Lew — who is pushing to overhaul the board and has the voting power to call an extraordinary general meeting.

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