Retailer Woolworths has inked a deal to sell its entire stake in David Jones, Australia’s oldest continuously operating department store chain, a move it says will improve its returns profile and remove R17 billion in related liabilities.
The sale to Australian private equity fund Anchorage Capital Partners is expected to be complete by the end of March 2023, Woolworths said in a statement, with the final proceeds yet to be determined.
During a conference call on Monday, CEO Roy Bagattini said the firm would realise value from the sale of the business, but declined to go into details, saying it was a complex transaction with a number of moving parts, but “absolutely positive for us”.
“It wasn’t that long ago that people were saying to me just give it away, just walk, close the door, and hand back the keys,” he said.
There would be no writedowns related to the sale, said Bagattini, adding that Australia remained an attractive market. The group sees its Country Road business becoming a more important part of the group.
While David Jones was now was cash-generative and profitable after extensive restructuring, it still wasn’t a fit for Woolworths, said Bagatinni.
“The structural economics are somewhat fragile here, this business needs extensive amounts of investment going forward, not only in its store portfolio but also in terms of its online business and its back-end system capabilities.
“That capital just doesn’t work for us, that sort of investment.
“We can as management invest our time and effort and wherewithal in businesses that really make a difference to our group.”
In 2014, Woolworths paid about R21.4 billion to buy David Jones, which is more than 180 years old, but had struggled with debt and its performance. It has recently been moving to cut its store space in order to improve cost controls and trading densities, as well as renegotiate leases.