Woolworths writes down value of David Jones - again
By Nick Hedley - Aug 1st, 09:25
Woolworths has once again reduced the valuation of struggling Australian department store chain David Jones, which has now more than halved in value in the five years since it was acquired.
Woolworths bought David Jones for A$2.1bn (more than R20bn) in 2014 as part of its plans to create “a leading southern hemisphere retailer”.
But with more consumers shopping online, department stores globally have been struggling, prompting Woolworths to impair David Jones by A$712.5m in early 2018 and subsequently make a number of executive changes.
The group’s woes in Australia have taken a toll on Woolworths’s shares, which have slipped from highs of more than R100 in 2015 to R55 at Wednesday’s close.
The Cape Town-based retailer said that it had once again impaired the value of David Jones, this time by a further A$437.4m.
That means the department-store chain is now worth just A$965m, or 46% of what Woolworths paid for it.
“A strategic review of the David Jones store portfolio has also identified stores with onerous leases resulting in an additional provision of A$22.4m at period end,” Woolworths said.
Woolworths said it made another basic loss in the 53 weeks to end-June because of the write-down.
After adjusting to account for the extra week in the financial year, and stripping out the impairment and other one-offs, adjusted diluted headline earnings per share fell by up to 5%.
A Woolworths spokesperson said the latest David Jones write-down “reflects sustained and unprecedented economic pressures and structural changes in the Australian market”.
The retail sector in Australia is experiencing a recession, with the domestic economy slowing to its weakest level since the global financial crisis in 2009.
“Operationally, our strategic initiatives position David Jones for the retail environment of the future."
“Our digital and online offering is expanding rapidly. We remain focused on reducing costs and reducing store space across our footprint,” the person said, asking not to be named.
The business’s new merchandising and planning systems, and the introduction of the David Jones Rewards loyalty programme were now complete.
The refurbishment of the flagship store “is on track with key womenswear floors opening this month”.
Meanwhile, “the exclusivity of our Country Road Group brands within David Jones will take effect from September, adding to the extensive collection of new, exclusive brands signed to David Jones this year in line with our focus on delivering an exclusive offering”, said the spokesperson.
“These initiatives align us closely with the changing needs and preferences of our customers.”
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