David Jones to speed up store closures as retail sales drop

Aussies are still reeling from the news that dozens of Target stores will soon shut – and it seems DJs could be next on the chopping block.

Plans to “restructure” the David Jones network are set to accelerate with the coronavirus crisis devastating sales at the already struggling retailer.

In a COVID-19 and trading update from parent company Woolworths Holdings Limited (WHL) – including David Jones and the Country Road Group – seen by news.com.au, the company indicated store closures were likely.

“Although David Jones (DJ) has continued to trade in its large format stores through the period, the impact of COVID-19 has had a significant impact on foot traffic and store sales,” the document states.

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“Sales and concession sales for the first nine weeks of H2 were up 0.5 per cent in local currency but declined by 35.8 per cent in the subsequent eight weeks to end-April.

“DJ’s online penetration continues to grow strongly, with sales in H2 to-date having doubled versus that of the prior comparable period.

“The easing of restrictions in Australasia has also commenced, and we are seeing a positive uplift in footfall and a commensurate, encouraging sales performance, across the DJ network of stores.”

However, the update also included a telling line about the brand’s restructure.

“Discussions with Australasian landlords are underway in relation to an accelerated restructure of the David Jones network of stores/locations and reduction in floor space,” it revealed.

It also claimed “contracts have been exchanged between DJ and the preferred purchaser” of the Bourke Street Menswear building.

The coronavirus crisis has hit the ailing brand hard. Picture: iStock

Final settlement is expected before the end on July, and “the sale price achieved is in line with expectations”.

In a statement provided to news.com.au, WHL Group CEO Roy Bagattini said the pandemic had sparked “unprecedented” challenges for the industry.

“This recent update reflects the tough and unprecedented trading conditions that have dramatically impacted performance across the retail sector globally,” Mr Bagattini said.

“Throughout this period, our group has taken proactive and immediate action to ensure the safety of our customers and employees, whilst optimising trade across all our businesses. “Notwithstanding the significant challenges we currently face as a business, we are well placed to respond rapidly and effectively to changing customer dynamics and capture the market opportunities that arise.”

Mr Bagattini said the company was “focused on the implementation of the strategic initiatives that will address the current and emerging needs of all our stakeholders”.

“By doing this we will position the business well for long-term future growth and success,” he said.

Aussies were blindsided by the announcement of Target closures and conversions. Picture: David Mariuz/AAP

The hint at looming David Jones closures comes less than a week after it was revealed that 53 Target stores across the country would close forever within 12 months, while a further 53 will be converted to Kmarts over the same period.

Some Target shoppers will have just a handful of weeks to prepare before their local store shuts or becomes a Kmart, with the Target branch in Pasadena in South Australia earmarked for closure by June 2020, followed by Campbelltown in NSW in July and Meadow Springs in Western Australia in August.

The remaining 50 closures are due to take place in early to mid-2021.

The existing Target branches in Seymour, Echuca and Cobram in Victoria will all become Kmarts in July, with conversions elsewhere in the state in Castlemaine, Kyabram and Woodend due to occur in September.

Meanwhile, it’s also bad news for the Country Road Group, with overall turnover “more adversely impacted” as a result of the decision to close all stores because of the difficulty of observing social distancing measures.

It caused a staggering 50.4 per cent drop in sales in the eight weeks to the end of April, compared with an increase of 1.7 per cent in the preceding nine weeks.

However, sales are expected to pick up as CRG stores began their planned reopening on May 22.