GLOBAL REACH

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

Financial Mail - Investors Monthly - - Contents -

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

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