By Emma Koehn
Retail analysts believe private equity giant Anchorage Capital is more interested in the value of David Jones’ brand than its physical operations as it closes in on a firesale acquisition of the historic department store chain.
South African retailer Woolworths Holdings looks poised to offload David Jones in the next week in a deal tipped to be worth between $120 million and $150 million – a sliver of the $2.1 billion that Woolworths paid for the company back in 2014.
Woolworths had big ambitions for creating an experiential retail brand in Australia but struggled to gain traction with its strategies, while the past two years of COVID-19 lockdowns hit sales at the brand, which has relied heavily on the performance of its flagship CBD stores in Sydney and Melbourne.
David Jones 2022 sales slipped slightly over the year to $2.06 billion, its latest accounts show.Credit: Michael Quelch
Founder of retail consultancy Retail Doctor Group, Brian Walker, said the department store’s imminent new owners have “basically bought the brand and [customer] database” noting that there’s an opportunity to return David Jones to its roots of catering to higher income individuals than its department store rival Myer.
Walker said the next five years would determine where David Jones ends up fitting in the Australian market. “David Jones is a very strong brand for that higher income disposable income customer. But it has found itself being managed into more of a mid-market position,” Walker said.
That could mean customers see more distinction between DJs and Myer in future, he said.
Associate professor of finance at Melbourne’s RMIT, Angel Zhong, said David Jones’ brand recognition was an important factor for the new owner’s interest.
“David Jones had a long history in Australia for its high-quality product and services. The brand recognition is indeed more incrementally valuable than the actual store network, as over recent years, online shopping has been more popular,” she said.
Sources with knowledge of the impending deal this week said that they expect Anchorage will invest in stores, but focus on an “omnichannel” strategy where shoppers will be able to easily transition between the online and bricks-and-mortar formats of DJs and experience the same level of service.
Co-director of Retail Oasis, Trent Rigby, said that DJs still held one of the “most respected department store and retail brands in Australia”.
“Additionally, the most valuable asset is quality and standard of concessions the DJ’s brand can get into store. Anchorage would be looking to utilise this,” he said.
Founded in 1838, David Jones can draw on more than 180 years of nostalgia to bring people through the door - but Zhong warned that while this pull is valuable, its impact is declining.
“The pandemic has changed consumers’ spending habit and attitudes toward brand loyalty. Also with rising costs of living, consumers prefer cost savings and good bargains instead of brand recognition,” she said.
Woolworths Holdings’ financial statements show the continued challenges in driving profits across the department store. According to the retailer’s 2022 financial statements, David Jones contributed a profit of 1.27 billion rand ($A108.3 million) in 2016, but just 216 million rand ($A$18.4 million) in 2022.
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