Woolworths Holdings will begin the complex task of untangling shared David Jones services from Country Road

Integrating David Jones and Country Road Group cost tens of millions and now the Woolworths Holdings boss concedes he faces the complex task of untangling the union.

David Jones shares a number of services such as IT, data and a headquarters in Melbourne with Country Road Group. Picture: Britta Campion

Woolworths Holdings chief executive Roy Bagattini has conceded he now faces the complex task of untangling and separating shared services between David Jones and the Country Road Group as the two retail operations share common IT, data, call centres and a headquarters in Melbourne.

The South African retailer had spent tens of millions of dollars integrating David Jones and Country Road Group, all of which will now need to be unwound.

Around 15 per cent of Country Road Group’s total sales are generated from its concession stands in David Jones stores, while a large slice of David Jones sales also are drawn from these brands that include Country Road, Mimco, Witchery, Trenery and Politix.

Meanwhile, a decision in 2017 to end 179 years history of David Jones being headquartered in Sydney with it moving to a specially built campus in Burnley, inner-city Melbourne, saw its Sydney-based staff uprooted and shifted down to a building it now shares with the Country Road Group.

Speaking to South African investors and analysts overnight after announcing the sale of David Jones to private equity firm Anchorage Capital Partners for $100m, Mr Bagattini also said the department store sale would see Woolworths Holdings be able to invest more in the Country Road Group as it is no longer distracted by David Jones operational issues.

Country Road will be separated from David Jones. Picture: Lachie Millard

On Monday Woolworths Holdings announced the sale of the 184-year old David Jones to Anchorage, for a price believed to be around $100m, ending an eight year ownership of the up-market retailer that it initially bought for $2.1bn.

But now the hard work begins to untangle the shared services between David Jones and Woolworths Holdings other Australian retailer, Country Road Group, which it is retaining ownership of. Country Road Group fashion brands such as Country Road, Mimco and Witchery will now get more attention from the South African owners.

“The separation, certainly the initial strategic intent was to integrate these businesses which obviously in hindsight has demonstrated that was not necessarily the best and most optimum approach.

“These are very different businesses and they operate very differently. Over the last two years in fact we have been progressively undoing a lot of that integration,” Mr Bagattini told South African investors.

He said the distribution and supply chain systems of David Jones and Country Road Group were totally separate and independent of each other but shared services would take time to disentangle which would be complex.

“There are certain operational processes and certainly certain IT systems which remain somewhat integrated … it is a little more complicated when it comes to the some of the shared services around data and call centres and the like. So we have already begun a process of mapping that out.

“There will be a transition period that we will work through. We have a committed plan ourselves and Anchorage have to go forward and execute with but we don’t expect that to have any detrimental impact on Country Road Group or either for that matter David Jones.”

Mr Bagattini told investors the company would not have more time and resources to devote to Country Road Group once Anchorage take ownership of David Jones in March, with the department store taking up a lot of disproportionate management focus, energy and effort.

“It has taken an inordinate amount of time and effort and energy from us, that clearly goes away now and that capacity will be redeployed against Country Road Group.”

Country Road Group brands are also sold extensively throughout David Jones stores and Mr Bagattini said the sales deals between David Jones and Country Road were done on purely commercial lines and he expected that to continue under the new Anchorage ownership.

But he said there was no specific agreement for Anchorage to buy stock from Country Road Group although there were supply contracts that ran for many years that would see David Jones stock Country Road Group brands in its stores.

Concession contracts that saw Country Road Group sites within David Jones stores had three to five years length, he said.

The sale to Anchorage of David Jones doesn’t include the flagship store in Melbourne’s Bourke Street mall, and Mr Bagattini said Woolworths Holdings wasn’t in a rush to sell it and would be collecting good rental returns as it works towards a property sale.