GLOBAL REACH

Since coming under the Woolworths umbrella, David Jones has been on a stronger footing, writes Zeenat Moorad

David Jones recovery promises more muscle for Woolworths

It’s only after one enters the gleaming ground floor of David Jones’s seven-storey flagship store on Elizabeth Street in Sydney that the magnitude of Woolworths’s R23,3bn takeover really hits home.

A tuxedo-clad piano player tickles the ivories of a grand Steinway. The counters are brimming with French perfume, and the cashmere scarves are delicately placed between rows of buttery-soft leather handbags. Woolworths suddenly seems more than just the store down the road where we buy Chuckles and double-thick cream.

Of course, investors have long been piling into Woolworths stock, lured there by the solid growth story. And they’ve been handsomely rewarded, as the 280% gain in the share price over the past five years illustrates.

In SA, it’s all going swimmingly. The company’s margin (measured using earnings before interest, tax and depreciation) has risen to 13,8%, from 11,9% a few years back.

And, as the numerous Woolworths food stores that have been popping up almost overnight in the more well-heeled areas of Jo’burg and Cape Town attest, the company still has plenty of scope to expand locally.

But CEO Ian Moir had bigger plans — which is why he wanted David Jones so badly. With the Australian chain store now part of Moir’s empire, Woolworths is offering something more: a vision that once David Jones recovers, it’ll add some mighty scale and heft to the retailer, making it a truly global company.

For most South Africans, David Jones was just another business in Australia pounced on by a voracious buyer. For Australians, it’s far more than that, however.

Every great city is said to have an iconic department store and, with 177 years of heritage, David Jones is akin to New York landmarks such as Bloomingdales and Saks Fifth Avenue or London’s Harvey Nichols and Liberty. And like Bloomingdales or Harvey Nichols, David Jones also lost its way at one point. Now, under Moir’s wing, the iconic Australian brand has a chance to reinvent itself.

As most executives will tell you, however, it’s never easy doing a turnaround. It typically takes far longer and is far more arduous than anyone expects.

But Moir has a few things in his favour: first, the Cape Town-based retailer knows how to do turnarounds. Country Roads, after all, was on the brink of bankruptcy when Woolworths swooped in, and today, post-makeover, it’s a thriving A$1bn business.

David Thomas, the chief financial officer at David Jones, told Investors Monthly that there’s been a lot of year-on-year retail growth in Australia. But the problem is that most of this growth has happened in specialty stores. Big department stores like David Jones have been either flat or declining. “The [previous owners] did not invest in the refurbishment of their stores. They took the service component

❛❛ Woolworths suddenly seems more than just the store down the road where we buy Chuckles and double-thick cream