DJ’s value slashed

THE South African owner of David Jones will slash its value by more than $700 million as department stores struggle to attract shoppers in a rapidly changing retail market.

Woolworths Holdings has told investors it will take a $712.5 million non-cash impairment against the book value of David Jones at its half-year profit report due next month.

Woolworths shelled out $2.1 billion buying the nation’s oldest department store in 2014, meaning it will write off close to one-third of its value.

The South African retail group yesterday said the writedown reflected “tough and unprecedented trading conditions, a cyclical downturn and structural changes that have impacted performance across the Australian retail sector”.

“The impact of these changes has been exacerbated by poor or delayed execution in certain key initiatives,” the company said in a statement.

“These conditions have not altered our focus on the transformation of David Jones and we are committed to the resolution of these execution issues and our ongoing investment plans for the business.”

The writedown is a blow to Woolworths which has invested heavily in David Jones in recent years, overhauling its private label clothing range, introducing new merchandising and customer relationship systems and renovating its Sydney flagship store. David Jones is also investing heavily in rolling out a gourmet food offering which it believes will provide a lucrative revenue stream and serve as a key attraction for bringing people into its stores.

Woolworths chief Ian Moir has previously acknowledged mistakes were made as David Jones revamped its private label ranges.

Woolworths, which also owns local brands Country Road, Trenery, Witchery, Politix and Mimco, warned it may be forced to write down the value of David Jones when unveiling a decline in sales earlier this month. Sales fell 3.8 per cent over the six months to December 24 compared with the same period a year ago.

Like-for-like sales, which strip out the impact of stores opening and closing, fell 3.3 per cent during a period which covers the busy Christmas period.

Woolworths, which is not related to the supermarket giant, will release its half-year profit report for David Jones on February 22.