DJs profits take tumble

Accounts a sorry tale for up-for-sale chain

DAVID Jones has recorded a significant slump in profits, with new accounts showing flatlining sales at the same time as its owner, South Africa’s Woolworths Holdings, attempts to offload the upmarket department store operator.

In August, the Johannesburg-listed Woolworths reported that adjusted operating profits at David Jones had fallen 0.6 per cent to $83.7m for the 2022 financial year.

But accounts now lodged with the corporate regulator by Osiris Holdings, the vehicle that houses the 184-year-old department store, paints a very different picture. The accounts show net profits collapsed to only $14.5m in 2022, from $84.3m in 2021 – an 82.7 per cent decline.

According to the Osiris accounts, revenue has also stalled, reported at about $2.06bn for 2022 against $2.11bn in 2021.

David Jones booked lower earnings from its American Express credit card agreement – once a key driver of earnings – with its profit share dropping to almost $21m, from $26.8m in 2021.

It was a similar story at Country Road Group, a vehicle also owned by Woolworths that houses the Country Road, Trenery, Mimco, Witchery and Politix brands.

In August, Woolworths said Country Road Group’s fullyear adjusted operating profit had fallen 22.3 per cent to $120.2m. However, Country Road Group accounts issued with the Australian Securities & Investments Commission reveal net profit actually fell 52 per cent to $43.24m.

The profit slide at David Jones comes as Woolworths attempts to sell the company after buying it for more than $2.1bn in 2014. Anchorage Capital Partners, a private equity firm considering the acquisition, was planning to outlay about $200m as it carries out exclusive due diligence.

Given David Jones owns its Melbourne store on Bourke St that a year ago was estimated to be worth about $250m, the sale price of $200m, as suggested by sources, would value the operating department store business at less than zero.

In 2020, David Jones reaped about $510m from the sale of its flagship Sydney property to Charter Hall.

In August, Woolworths chief executive Roy Bagattini admitted for the first time after a year of speculation that it was now actively considering a sale of David Jones.

“Having successfully executed against our balance sheet and income statement priorities, we are now evaluating all possible options to unlocking value for Woolworths Holdings and its shareholders,” Mr Bagattini told analysts in South Africa in relation to the David Jones business.

Under Mr Bagattini, David Jones has returned to profitability, partly driven by hundreds of millions of dollars in impairments and writedowns.

But Woolworths is now selling David Jones at a time when many believe discretionary retail is at the peak of the cycle. Difficult conditions are expected next year as the impact of rising interest rates and higher inflation hits consumers.

David Jones CEO Scott Fyfe said the company had delivered a strong profit and was a stabilised, self-funding business: “Fiscal 2022 was a tale of two halves – with the first affected substantially by lockdown restrictions, and the second showing an even stronger than forecast rebound.”