Australia’s 188-year-old David Jones enters administration as sale process begins

Australia’s 188-year-old department store chain David Jones has entered voluntary administration, with its stores continuing to operate as administrators begin seeking offers to recapitalise or sell the business.

The decision, announced on Thursday (November 5), follows mounting operating costs, weak retail sales and supply chain pressures. The retailer employs approximately 6,000 people across 38 stores in Australia and New Zealand.

FTI Consulting has been appointed as receiver and will oversee the company’s operations while reviewing the business. McGrathNicol has been named voluntary administrator and will manage the process of attracting potential investors or buyers.

In a joint statement, the two firms announced that they would immediately invite proposals for either a capital injection or the sale of David Jones as a going concern.

They acknowledged that the restructuring could affect stakeholders and involve difficult decisions.

David Jones chief executive Erica Berchtold indicated that the retailer had developed a plan to reshape its business and would work with the administrators, receivers and secured lender to implement it.

The voluntary administration process, broadly comparable to Chapter 11 bankruptcy protection in the United States, allows the company to pursue restructuring options while its stores remain operational.

Historic retailer struggles with changing shopping habits

Founded in Sydney in 1838 by Welsh immigrant David Jones, the company describes itself as the world’s oldest continuously operating department store. It began trading more than a decade before London’s Harrods.

For generations, the retailer has been associated with clothing, accessories and other purchases for important occasions, including formal events and graduations.

However, its traditional department store business has faced increasing pressure over the past decade as consumers have shifted towards online shopping and fast-fashion retailers.

Private equity firm Anchorage Capital Partners acquired David Jones from South African retailer Woolworths in 2022 for a reported A$100 million.

Landlord dispute adds to financial pressure

The administration follows unsuccessful discussions involving David Jones and Scentre Group, which owns and operates Westfield shopping centres across Australia and New Zealand.

According to ABC News, Scentre had offered financial support to the retailer, but the proposal was rejected by Anchorage Capital Partners. The report cited Scentre chief executive Elliott Rusanow.

David Jones operates stores at 17 Westfield locations.

In a statement to the Australian Securities Exchange on Wednesday, Scentre confirmed that David Jones had paid rent up to September 30.

Although the administrators have not disclosed the retailer’s latest financial figures, the company has experienced financial difficulties for several years.

The restructuring also comes as Australian businesses contend with higher borrowing costs and pressure on consumer spending.

The Reserve Bank of Australia raised interest rates for a fifth consecutive time this week, highlighting persistent inflation risks and further pressure on household finances.

The administrators will now assess proposals aimed at securing the retailer’s future, with a potential sale or recapitalisation forming the immediate focus of the restructuring process.

Source: Reuters