Woolworths Holdings investors rebel as losses mount at David Jones

Up-market department store David Jones has rung up cumulative losses of $1.4bn over the last three years.

Woolworths Holdings shareholders revolted against a lucrative golden handshake to chief executive Ian Moir. Picture: Mark Wilson

Up-market department store David Jones has rung up cumulative losses of $1.4bn over the last three years as the worst trading conditions in decades, misfiring strategies pushed through by its South African owners and savage impairments to its brand have almost eclipsed the purchase price of the retail chain six years ago.

South Africa’s Woolworths Holdings reported in September that David Jones had skidded to a $33m operating loss, but the latest accounts lodged with ASIC for Osiris Holdings, the local company that houses the David Jones business, reveal a bottom line loss of $125.9m. This comes on top of a $489.23m loss in 2019 and $785m in 2018.

Investor anger over the mounting losses has boiled over in South Africa, where at Woolworths’ annual meeting last week there was an 82.24 per cent vote against its remuneration report.

Shareholders revolted against a lucrative 77 million rand ($6.8m) golden handshake to outgoing chief executive Ian Moir.

It was Mr Moir who as Woolworths CEO in 2014 launched the $2.1bn takeover of David Jones which also came with a $213m bill to mop up the outstanding shares in Country Road, where retail billionaire Solomon Lew had sat on a blocking stake for 17 years.

Mr Lew seized a small stake in David Jones when Mr Moir made his bid. It was viewed at the time as leverage to up-end the deal unless Woolworths also paid up for the rest of Country Road.

Mr Moir has since stepped down from Woolworths Holdings but at the AGM shareholders expressed their displeasure over the R77m payout, of which R43m was paid out for 2020 and R34.3m will be paid in 2023 under a non-compete clause.

Woolworths acknowledged the angst over Mr Moir’s golden handshake in the wake of almost $1bn in recent impairments at David Jones, whose purchase and strategy was led by Mr Moir.

At the AGM, directors and remuneration committee chair Zarina Bassa is reported to have said the R44m “exit arrangement” for Mr Moir had helped smooth the way for a seamless transition to new CEO Roy Bagattini.

She added that no bonuses or salary increases had been extended to Mr Moir in the last four years.

Woolworths Holdings bought David Jones for $2.1bn in 2014 but has now burned through more than half of that value. Picture: NCA NewsWire

The local accounts for Osiris show the scars of the economic downturn caused by COVID-19 and the impairments triggered by the falling value of its key retail assets, as well as recent accounting changes to leasing for retailers. The 2020 accounts also carry impairments to David Jones stores and fixtures as well as the cost of shrinking its national store footprint.

The 2020 accounts lodged with ASIC show total impairments for fiscal 2020 of $52.75m, against impairments of $622m in 2019.

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

Recently there has been a rebound in performance as the up-market store sees early signs of a recovery outside of Victoria, with sales growth in other states and a booming online business during the pandemic.

Earlier this month it said revenue across its DJs stores and its specialty chains such as Country Road, Mimco and Trenery rose by 6.7 per cent for the first half to November, after excluding the Victorian store network.

Although it wasn’t enough to counter the appalling trading conditions in Victoria, with DJs posting a sales decline of 11.7 per cent for the 20 weeks to November 15 and by 14.6 per cent in comparable store sales.

Mr Bagattini said the company would use funds raised from selling some of DJs’ Australian properties to pay down debt and strip out other costs to help the chain emerge profitable when the COVID-19 crisis ends.

Mr Bagattini told The Australian in September he believed the department store could return to profitability.

“I think the David Jones business can absolutely be profitable in a context that we are in and moving into. We would be very disappointed if we don’t see some significant improvement in the performance,’’ Mr Bagattini said.