Firm sells chain store David Jones
SYDNEY: Woolworths Holdings Ltd agreed to sell Australia’s oldest department store chain David Jones to Anchorage Capital Partners, ending an expensive misstep for the Cape Townbased retailer.
The deal will remove about US$965 million of liabilities related to the David Jones store portfolio, with the final value of the deal to be determined by the end of March, when the transaction is expected to be completed, Woolworths said in a statement yesterday. Management expects to get more than the carrying value of the David Jones assets, it said.
The change of ownership marks another attempt to transform the nearly 200-year-old David Jones after Woolworths acquired the chain back in 2014 for around A$2.2 billion (US$1.5 billion).
“The history here has been a painful one,” Chief Executive Officer Roy Bagattini said in a conference call. “The transaction allows us to overnight improve our return on capital by several percentage points.”
The sale will allow management to shift its focus to other units, Mr Bagattini said. Under predecessor Ian Moir, Woolworths tried to replicate its successful South African upmarket food business in David Jones, but it didn’t work. In October, Mr Bagattini said the David Jones purchase didn’t make sense, with the two retailers being fundamentally different. Woolworths primarily sells own-branded goods and its Australian counterpart mostly offers other brands.
Woolworths rose 1.7% at 9.03am in Johannesburg and has climbed 30% since Bagatinni’s appointment on Jan 14, 2020. That’s compared to a 3.8% increase for the FTSE/JSE Retailers Index, which suffered during pandemic lockdowns.
The company will keep the flagship store in Bourke Street, Melbourne, which will be leased to David Jones on a long-term basis on market-related terms, it said. There will also be a transitional services agreement “for a period of time to ensure an orderly separation of David Jones from the group”.
For Woolworths, it’s returning once again to core clothing ranges in its South African apparel unit and refocusing on the five local brands in its other Australian business, Country Road Group.