David Jones collapse hits Woolies, despite it selling the unit in 2023

The collapse of Australian department store chain David Jones (popularly known as ‘DJs’) into administration last week will mean a hit for Woolworths Holdings’ unit in that country, Country Road Group, despite the retailer disposing of DJs in 2023.

It eventually found a private equity buyer for the business, Anchorage Capital Partners, which paid about R1.5 billion – significantly less than the R21.5 billion Woolies paid for it in 2014.

Read: Woolworths’s R21.5bn Australian gamble ends in David Jones collapse Failed Australian chain David Jones in limbo in hunt for buyer Failed Australian chain David Jones to close half its stores

Buried in a shock trading update on Wednesday, Woolworths warned that: “Various Country Road Group brands trade as concessions within David Jones, which has been placed into administration and receivership.

“We are in communication with the appointed receivers and managers and are assessing what this means for the continued trading relationship.”

That shock trading update saw Woolworths shares close down 8.5% on the day.

Read: Woolworths shares slide as sales growth stalls

The Australian Financial Review (AFR) reported last month that Country Road Group would cut nearly 100 of the 280 Country Road, Witchery, Politix, Trenery and Mimco fashion and accessory concessions it operates across the David Jones store network.

The cuts were planned for February, and the AFR reports that Mimco is the brand that will see the biggest reduction in space and presence at DJs.

These concessions are no different to those that it operates inside Woolworths outlets in South Africa.

This will be a drag on Country Road sales, which were barely positive (+1%) in the year to the end of June.

Fewer stores, so even fewer concessions …

This would be bad enough, but receivers FTI Consulting said on Wednesday that it would undertake an “urgent restructure” of David Jones which would see half its store network – 19 stores – shuttered.

“For the immediate term these stores will continue trading and while there is no final date for the closures, we anticipate they will cease trading by the end of the year,” it said.

Under this plan, David Jones’s lone store in Auckland, New Zealand would be closed.

The AFR reported that under Country Road’s original plan to reduce concessions, all five of the group’s brands would be removed from that outlet.

The most pressing issue for Country Road now is just how many more of its concessions will be removed due to the 19 David Jones stores being closed.

It is entirely conceivable that an additional few dozen concessions that were not planned to be pulled will now be slashed.

This will further strain Country Road Group sales growth in a very difficult trading environment.

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It has added concessions to Myer following the DJs disposal by Woolworths, but the group told the AFR that it was “not expanding in Myer stores”.

Woolworths does not disclose the split from concession sales, but in FY2010 (Country Road Group ’s final year as a separately listed company), these comprised around 20% of the total.

The business reported turnover of A$1.1 billion (R12.2 billion) in the last financial year.

Only Country Road Group and Woolies executives know what proportion of total sales the DJ concession business make up …

But losing, say, half of these ‘pads’ in the next few months could wipe out a few hundred million rand of sales.

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There will be a broader, indirect impact too.

Dean Zanapalis, CEO of TFG Australia, said last week that while it doesn’t do any business with DJs, he expects there to be “some deep discounting” ahead of Christmas as “they try to clear through stock”.

TFG Australia operates in about 20 malls that have a DJs outlet and Zanapalis says there will be some pain in the short term …

But in the medium term “we’re absolutely going to target that customer, so they’ve got somewhere else to go, hopefully that’s us”.

Woolworths says that at the end of June 2026, Country Road Group operated 529 stores in Australasia and 92 in South Africa (it closed 13 stores Down Under in the last 12 months).

Read: Woolies gets another R500m hiding in Oz The only SA company to make it really big in Australia

By next June, it plans to shut a further 66 stores and another 10 in the following year.

For the year, Country Road Group reported adjusted Ebit (earnings before interest and taxes) of R27 million. Excluding the impact of forex and higher fuel costs, the number was R39 million.

However, because of finance costs, Country Road Group reported a loss before tax for the year of R361 million.

What a shining example of how an imported CEO can ruin a business.

Last two CEO’s earned a whole ton of scratch for very expensive mistakes that shareholders are paying for.

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