South African Woolworths Holding Limited, owner of David Jones (‘DJ’) provided a trading update yesterday. In another shake up of major stores, the group announced that due to the slump in recent sales at its David Jones stores across Australia, there will be a review of their store network and store closures are part of their imminent future. This follows the Wesfarmers announcement last week of its Target portfolio.
David Jones has continued to trade in its large format stores through the COVID-19 period, and the company cited it has had a significant impact on foot traffic and store sales. Sales and concession sales for the first nine weeks of the half year were up 0.5% but declined by 36% in the subsequent eight weeks to the end April. David Jones’s online penetration continues to grow strongly, with sales in the first half to-date having doubled versus that of the prior comparable period.
In terms of the Country Road Group (‘CRG’) Overall turnover within CRG has been more adversely impacted as a result of the decision to close all stores given the challenge of maintaining social distancing protocols across their smaller store formats. This resulted in a 50% drop in sales in the eight weeks to end of April, versus an increase of 2% in the preceding nine weeks. Online sales remain strong, with growth of 19% in the half year to date. Country Road stores began their planned re-opening as of 22 May.
In addition, the group have appointed UBS Australia to do a review of the capital structure of the Australasian entities and will include the restructuring of its borrowings to ensure a more sustainable funding structure. UBS Australia appointment will support this process and they will conduct a full review of options relating to the Australasian property portfolio. Any proceeds generated as a result of our capital management initiatives will be applied to the repayment and cancellation of debt facilities.
As a first measure, with specific regard to the status of the sale of the Bourke Street Menswear building, contracts have been exchanged between David Jones and the preferred purchaser. The sale price achieved is in line with expectations and final settlement is anticipated before the end of July 2020.
David Jones sold its Sydney CBD menswear location several years ago, and the women’s store building now is occupied by David Jones across 12 floors.
David Jones sold its Sydney CBD menswear location. Scentre Group and CBUS have plans to redevelop the site
Woolworths Holding Limited said “Discussions with Australasian landlords are underway in relation to an accelerated restructure of the David Jones network of stores/locations and reduction in floor space.”
Woolworths Holdings Limited also said its Australian lenders agreed to suspend covenant testing after it provided a loan of $75 million to David Jones. Woolworths also is offering an additional $25 million loan should David Jones require it.
The company has suspended distributions to shareholders until such time as the situation arising from COVID-19 stabilises.
