David Jones writes down $437m, says local retail in recession

David Jones’s parent says the retail sector is in a recession as it slashes its value by another $437m.

The latest impairment means a total of more than $1.1bn in value has been stripped from David Jones in two years. Picture: Bloomberg

South African company Woolworths Holdings believes the Australian retail sector is in a recession and has been forced to write down the value of its up-market department store David Jones by $437.4 million to reflect the tough trading conditions it is facing in Australia which has seen its sales flat line and profitability sink.

Woolworths Holdings bought David Jones for $2.1 billion in 2014 but it has now burned through more than half of that value with the valuation of the department store now reduced to $965m.

In a statement to the Johannesburg Stock Exchange this afternoon, Woolworths Holdings said it was forecasting a loss for fiscal 2019 with an impairment charge of $437m recognised in the year with a strategic review of the David Jones store portfolio also identifying onerous leases resulting in an additional provision of $22.4m in the period.

Under the watch of Woolworths Holdings chief executive Ian Moir, who led the purchase of David Jones five years ago, its value has been torched with the company booking an impairment of $712m against David Jones in 2018 as the poor retail conditions hit its performance.

The latest impairment means a total of more than $1.1bn in value has been stripped from David Jones in two years.

Woolworths Holdings said the latest impairment was a result of the “economic headwinds” and the “accelerated structural changes affecting the Australian retail sector” as well as the performance of the business which has fallen short of expectations.

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

“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.

“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 adding to the extensive collection of new, exclusive brands signed to David Jones this year in line with our focus on delivering an exclusive offering. These initiatives align us closely with the changing needs and preferences of our customers.”

Last month, David Jones triggered 120 redundancies across its stores and headquarters.

Earlier in July Woolworths told the stock exchange in South Africa that David Jones had suffered a third consecutive year of shrinking like-for-like store sales. The company said like-for-like sales for the 52 weeks had slipped 0.1 per cent.