David Jones teeters on edge of collapse as the department store chain falls behind on rent
Iconic department store group David Jones could enter voluntary administration after 188 years of trading as the Christmas shopping season begins.
A storied Australian department store chain is teetering on the brink of collapse on the eve of the all-important holiday season.
The boards of David Jones and its owner, Anchorage Capital Partners, are poised to announce a decision to enter voluntary administration on Thursday morning after talks with their landlords broke down.
The boards held a crisis meeting on Wednesday night.
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Rent had not been paid since September and the group was “in breach”, Scentre Group chief executive Elliott Rusanow said.
“We have made a generous offer to Anchorage Capital Partners that would have facilitated the continuation of David Jones trading and that offer has disappointingly been rejected by them,” Mr Rusanow said.
The company had paid $45 million in rent for the first nine months of the year, up to September 30.
David Jones’ landlords have $45 million in bank guarantees for its stores that could be used to pay rent.
Scentre Group required the guarantees as a condition of approving Anchorage Capital Partners’ acquisition of the troubled retailer in 2023.
Scentre Group’s share of the bank guarantees is $30 million, or about eight months of gross rent.
The Sydney-based private equity firm paid $100 million for the 188-year-old retailer, a fraction of what its previous owner had paid nine years earlier.
South Africa-based Woolworths Holdings Limited paid $2.1 billion to acquire the then-ASX-listed group in 2014.
Department stores had declined in relevance in the past five years as consumer habits shifted, analyst Mia Jeremic said.
“Competitive pressures have intensified, with online-only retailers like Amazon and Shein capturing price-sensitive demand, while specialist players like Mecca have responded more quickly to shifting consumer preferences,” the Melbourne-based IBISWorld analyst wrote in a report in April.
In the US, Macy’s began closing 150 stores this year to focus on higher-performing flagship locations, while in Germany, dominant department store operator Galeria Karstadt Kaufhof has shut dozens of outlets.
David Jones’ larger Australian rival, Myer, announced in September it had lost $276 million last financial year, its second-worst year in 126 years of operation.
