200-year-old retailer dumped by Woolworths enters business rescue

Australia’s oldest department store, David Jones, collapsed on Thursday, finally succumbing after almost 200 years as the digital era drove shoppers to cheaper and nimbler online rivals.

McGrathNicol executives were appointed as voluntary administrators, while FTI Consulting staff were named receivers, according to a statement.

David Jones’ physical and online stores continue to trade while McGrathNicol seeks buyers or offers to recapitalise the business.

The chain’s old-fashioned and costly model of vast stores stocked with dozens of fashion brands, beauty products, and other accessories proved ill-suited to the modern-day consumer.

More recently, the out—of—date model collided with a cost-of-living crisis in Australia that has intensified pressures on household budgets.

Commercial landlords said David Jones had fallen behind in its rent.

“The current retail trading environment, rising costs, a significant and outdated retail footprint, and supply-chain challenges have led to this point,” said Christopher Hill, one of the FTI Consulting receivers.

Private equity firm Anchorage Capital Partners bought David Jones in 2023. 

David Jones has stores at about 38 locations across Australia and New Zealand. The upmarket retailer was founded in 1838, half a century after Britain started sending convicts to Australia.

The company is named after the Welsh-born immigrant that opened a store in central Sydney. 

“We’ve changed how we shop, when we shop and where we shop,” said Gary Mortimer, a professor at Queensland University of Technology’s business faculty who specialises in retail and consumer behaviour. “We’ve seen a shift online.”

David Jones has also been hamstrung by long-dated agreements with landlords, which can lumber tenants with unprofitable stores at the wrong locations for years, Mortimer said.

“Commercial leasing isn’t nimble,” Mortimer said. “Maybe 70 years ago, it didn’t need to be.”

David Jones Chief Executive Officer Erica Berchtold said in the statement that the company has a “well-developed plan on how to reset the business for the future.” She didn’t elaborate.

Iconic brand

The retailer’s failure this week extends a history of diminishing returns from the once-iconic brand.

Johannesburg-listed Woolworths bought the chain in 2014 for around A$2.2 billion ($1.5 billion), but struggled to replicate its successful South African upmarket food business.

The Covid-19 pandemic set the Australian retailer further back. Anchorage paid little more than A$100 million for David Jones, according to reports at the time.

Property group Vicinity Centres said Thursday that David Jones owed rent of about A$2.2 million as of Oct. 31, even though some of the stores in question were among the retailer’s most productive.

Scentre, owner of the Westfield malls that are home to many David Jones stores, said the retail chain had paid rent to 30 September.

David Jones has space at 17 Westfield centres, Scentre said.

According to the Australian Financial Review, talks on Wednesday between David Jones and landlords failed to produce a resolution.

The discussions had included giving three months of rent relief to the struggling retailer and scaling back its store network, the newspaper said.