David Jones on life support as directors weigh insolvency
There are more signals retail icon David Jones is on life support as it undergoes a painful restructure amid brutal trading conditions.
Major fashion brands have already pulled away from the department store giant, slashing the amount of floor space they operate.
Major brands are reducing their footprint across David Jones stores. iStock
Now the beleaguered company’s main lender, UK special situations investor Hilco Global, may decide to pull the plug and wind up the company, the Australian Financial Review reports.
Hilco has the green light to proceed because David Jones broke a loan covenant, according to two people briefed on the issue who asked to remain anonymous because they were not authorised to comment.
Hilco decided against accelerating the loan agreement due to the breach, and instead pumped more capital into 190-year-old David Jones last week.
“Hilco has funded above the agreed facility to allow David Jones to increase stock holdings ahead of the busy Christmas trade and sales period. Hilco remains supportive of the business,” a Hilco spokesman said.
Australian private equity firm Anchorage Capital Partners has been running David Jones since 2023.
In its bid to turn around the ailing retail giant, it secured Hilco as primary lender in July.
But David Jones is facing a battle for survival.
The retailer has been lashed by collapsing sales, rising losses, and an exodus of major fashion brands.
The retailer has reported a $95.5 million pre-tax loss, with sales plunging almost 9 per cent.
Brands including Country Road, Witchery and Mimco are among the brands looking to scale back their presence, while luxury labels including Gucci, Chanel and Christian Dior have already reduced their footprint.
In January, stores at Castle Towers in Sydney and Tuggerah on the Central Coast closed.
Retail historian Dr Matthew Bailey said the retailer faced difficult trading conditions. Supplied
Earlier this year, retail historian Dr Matthew Bailey of Macquarie University said a combination of short-term and long-term issues were placing pressure on the iconic department store chain.
Competition from online retailers, the shrinkage of department stores and the growth of shopping centres, the cost-of-living crisis, increasing labour costs were all limiting David Jones’ future growth.
“I think we’ll probably see fewer stores, smaller stores,” he told A Current Affair.
“It’s a slow decline.”
Bailey said demographic pressures were increasing too, with younger shoppers preferring to buy online, while David Jones’ traditional customers were heading toward retirement and spending less.
Anchorage Capital Partners has been contacted for comment.
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