David Jones suffers $437m writedown

DAVID Jones has lost more than half its value since it was bought five years ago after its South African owner struck another $437.4 million from the value of the department chain.

Woolworths Holdings, which paid $2.2 billion for the upmarket stores in 2014, said in a trading update to the Johannesburg Stock Exchange it had now reduced the value of David Jones to $965 million.

It also made a $22.5 million provision against stores with onerous leases.

“The impairment reflects the economic headwinds and the accelerating structural changes affecting the Australian retail sector as well as the performance of the business, which has fallen short of expectations,” Woolworths Holdings said in a statement.

“The WHL Board believes that the valuation of David Jones is realistic and reflective of its prospects.”

It is the second major noncash impairment against David Jones in two years after a $712.5 million writedown Woolworths Holdings also attributed to a broad retail downturn.

Yesterday’s update from Woolworths follows NAB economists’ declaration in June that Australia’s retail sector was “clearly in recession” with few indications that general business conditions would improve soon.

Department store volumes – or real spending – increased by 1.4 per cent for the June quarter to outperform the overall rise, but department store sales during the month of June stagnated.

It was the only sector post a monthly decline.

David Jones last month announced it was shedding 120 to jobs from its head office and suburban store network as it refocused its investment on digital and online retail.

The chain’s sales for the last full financial year fell 0.4 per cent on a comparable stores basis, but comparable sales rose 0.9 per cent in the first half of FY19.

The improved result was followed by the resignation of chief executive David Thomas after almost 18 months in the role, with Ian Moir named his successor.

Fierce rival Myer has also struggled in recent times, booking $541.2 million in costs and significant items in FY18 after a series of profit downgrades.

The Asx-listed company narrowly avoided a second strike from shareholders at its annual general meeting in November, following a long-running public campaign by major shareholder Solomon Lew to oust the board.

Myer has, however, shown some signs of recovery, reporting a $38.4 million first-half profit in March and reducing its debt by a third as it works to stabilise its once-precarious financial position.