Woolworths South Africa buys David Jones Australia for $2 billion

[mistermoose]

http://www.bbc.com/news/business-26950501

Apparently, walking into a David Jones store will very soon feel exactly like walking into a Woolworths store. This won't be a bad thing, surely?

[Bronwyn&Co]

http://www.bbc.com/news/business-26950501

Apparently, walking into a David Jones store will very soon feel exactly like walking into a Woolworths store. This won't be a bad thing, surely?

Wow!!! Haven't read that one in Australia yet. Interesting times. I wonder why Joe Hockey is worried about 'competition concerns' shame I hardly think that's an issue with the massive duopoly we have in Australia.

Exciting stuff!

Thanks MrMoose.

[Jordy]

Dont count your chickens just yet....But lets hope the shareholders accept the offer and the regulators approve the purchase.

[21yearsoutofrsa]

I don't shop at DJ, but my wife does. She's never been to South Africa, so has no idea what a Woolworths store looks like. I'm intrigued as to why Mrmoose thinks that changing DJ to look like a RSA w'worths would be a good thing.

It may make it more familiar to 150k South Africans in Australia, but what else? Is the Rsa we business model superior?

A cynic might say it cost the Rsa shareholders a lot of money to get some senior managers visa sponsorship to Australia. Lol

[AndreaL]

It remains to be seen if there will be changes. I don't think they are going to re-invent the wheel, but will look at components that do and don't work,

Mr Moir said he believed Woolworths could add $130 million per year to David Jones bottom line, a vast improvement on the full-year net profit of $95 million the upmarket department store recorded for fiscal 2013.

His plan for achieving this includes ramping up the proportion and quality of private label apparel in the stores, a better product mix, an improved customer relationship program that anticipates shopper behaviour as well as better service from in-store staff.

The penetration of private label sales in David Jones will jump from their current "tiny" level of around 3 per cent to more than 20 per cent, Mr Moir said.

He is also aiming to generate a greater proportion of sales via the retailer's online presence, aiming for online to make up 10 per cent of sales.

Mr Moir previously ran clothing retailer Country Road in Australia on behalf of Woolworths, which controls the chain.

''This is a natural progression of what we have been doing," Mr Moir said.

"We have got Country Road, we've had Witchery and mimco and we are adding David Jones again because we want to be one of the biggest retailers in the southern hemisphere.''

Read more: http://www.smh.com.au/business/retail/we-love-it-to-death-woolworths-sa-has-big-plans-for-david-jones-20140409-36cpb.html#ixzz2ySDyoDlB

http://www.theage.com.au/business/retail/one-name-two-retail-giants-meet-the-other-woolworths-20140409-36c3s.html

[Brad76]

I've just read a brokers report that seems to think the offer price is a little too ambitious - likened it to the Wesfarmers / Coles purchase of 2007. If he's right the next decade or so won't be a happy time for Woolworths shareholders!

Edited April 10, 2014 by Brad76

[Johnno]

I've just read a brokers report that seems to think the offer price is a little too ambitious - likened it to the Wesfarmers / Coles purchase of 2007. If he's right the next decade or so won't be a happy time for Woolworths shareholders!

correct me if I'm wrong but is Coles not one of the best things Westfarmers have done? The share price shot up to a record high on news of the acquisition but then along with the rest of the ASX shares took a hammering through 2008-2009 but like the rest of the ASX it's bounced back. I think Woolies SA is on to something pretty smart here!

[OubaasDik]

Somewhere where we can get decent pies ..... hopefully.

[mistermoose]

I'm intrigued as to why Mrmoose thinks that changing DJ to look like a RSA w'worths would be a good thing.

Woolworths is an exceptional shopping experience. You pay for what you get, but generally you get a much higher standard (and wider range) of quality items, especially on the food side. Why wouldn't you want that?

[RYLC]

(and wider range) of quality items, especially on the food side.

Just wondering where you currently do your grocery shopping because the choice here is overwhelming (too much in my opinion)?

[RYLC]

Somewhere where we can get decent pies ..... hopefully.

So describe a decent pie and we can all get our thinking caps on for you.

[Brad76]

correct me if I'm wrong but is Coles not one of the best things Westfarmers have done? The share price shot up to a record high on news of the acquisition but then along with the rest of the ASX shares took a hammering through 2008-2009 but like the rest of the ASX it's bounced back. I think Woolies SA is on to something pretty smart here!

Apparently not when it came to investor returns - the % roi has dropped dramatically between the pre - post acquisition period. It seems the takeover was a good thing for coles and perhaps in time for Wesfarmers but the amount of debt incurred to finance the acquisition was damaging.

[gordonza]

A cynic might say it cost the Rsa shareholders a lot of money to get some senior managers visa sponsorship to Australia. Lol

I must be a cynic.... it is exactly what I was thinking on hearing the news...

[Fish]

http://www.bbc.com/news/business-26950501

Apparently, walking into a David Jones store will very soon feel exactly like walking into a Woolworths store. This won't be a bad thing, surely?

I couldn't find that statement ?

Edited April 10, 2014 by Fish

[mistermoose]

I couldn't find that statement ?

CEO of Woolworths, Ian Moir, said it during an interview on Cape Talk last night.

[Fish]

CEO of Woolworths, Ian Moir, said it during an interview on Cape Talk last night.

No wonder I missed it DJ's is probably the fanciest main dept store we have here. I read in the paper today that woolworths would bring the prices down at DJ's and increase "own brand" sales from 4% to 20%. Is woolworths a high end dept store ?

DJ's doesn't have a food hall at most stores any more so would be good if more food halls went in...do all woolworths have them ?

Edited April 10, 2014 by Fish

[Sunnyskies]

OK, let me add my 2c and be pilloried!

Woolworths might aspire to be a store like DJs, but is more Marks & Sparks (to put it on the international stage) but I don't think that it meets that mark anymore. In my mind and for South Africans who don't know DJs its like going to Garlicks (in the 80s) or Stuttafords (when it first opened), just bigger, glitzier and with even more variety and stock. Going into DJs in Melbourne CBD reveals 8 or 9 (not quite sure but more than 6) storeys, with the bottom level dedicated to beauty products, fragrances, sunglasses, scarves, hats (or fascinators if it is racing season), jewellery, Miu Miu and more. The next 3 levels are dedicated to ladies clothes and shoes, some designer (and some outrageous prices) and some not, then you get to kids, then Manchester (linen), then appliances and kitchen ware. Mens clothing is in another store across the road (I'm not sure how many floors) and a food hall and dining area downstairs. Dotted throughout the store are places to stop and eat. Funnily enough, I don't really shop much at DJs, I prefer Myer if I'm going to a department store but it is always good for a wander through.

I know South Africans love their Woolies, and even I went through withdrawal symptoms when I arrived but in going back to South Africa in December I found that the SA Woolies was not the shop it used to be and a lot of their stock came from China. In fact we found nothing much to buy in Woolies until we looked at the Country Road section. Funny that it was only in the news reports in the last few days that I worked out that Country Road is now 88% owned by Woolies (following an acquisition a few years ago) so I'm not sure who is influencing who anymore in relation to Country Road but it does remind me of Woolies clothes 6 years ago (and a lot of my South African friends said that they only buy Country Road at Woolies nowadays). For Bob and Fish, I think the best way to describe SA Woolies is an upmarket Target with better quality clothes (some name brands and some private label) and homeware (including Manchester which seems to carry designs similar to those you find at Bed Bath n Table - so who knows maybe SA Woolies owns them too), well laid out and with great displays, a descent range of beauty products combined with a smaller version of a newly renovated Australian Woollies (ie a small supermarket beautifully laid out, well stocked, with lots of deli food, half prepared food (such as precut veggies that you just need to pop on the stove or in the microwave) or pre-prepared food good for a working mom to pick up and get her family fed quickly.

I think that the driver behind the sale is a desire to move into a market where disposable income is higher and more evenly spread across the population.

I can't really comment on the Wesfarmers acquisition of Coles, bear in mind that that was a $19billion acquisition at a time when the world had gone mad and deals were struck that made no rational sense on the basis that the value of assets acquired was only going to continue to increase. I do have to question the price Woolworths is offering for DJs shares, but this would be a big bang expansion for Woolworths into a pre-existing market and a massive pre-existing footprint without trying to break in like Pick n Pay tried (and failed) with Franklins.

I love the South African entrepreneurial spirit.

[Johnno]

Very well put, my thoughts, 100% !

[Fish]

Thanks for the explanation Sunnyskies.

[Bronwyn&Co]

If only they came into DJ's and sold their pies in Rand prices (no chance!). I must agree with Oubaas Dik. Looking forward to a nyummy Woollies pie now.

I'm just sad, I heard they stopped selling my favourites - plum chicken kebabs.

I'd liken DJ's to Stuttafords myself. I wouldn't liken Woolworths to Target though!

[Renny]

I would just be after Woollies for their food. My husband goes to woollies and buys country road clothing...he loves it!!!

When we had our family from Aus here in Oct last year, they all commented on our woollies saying how nicely displayed the products was and how everything was wrapped and clean. They seemed very impressed with woollies (the food side)

I LOVE woollies because the one up the road from my house has a large organic section and we now get 25% discount because of Vitality! Got to love it

[DanieR]

I totally agree with Renny. After 6 years in Aus the one thing we love being back in SAfrica is shopping for excellent quality food at Woolies (and to enjoy a 25% discount on healthy foods!).

In my opinion the quality is superior to what we experienced, and I therefore believe it is really good news for Australians. We just hope Woolies and Vitality will both be well established by the time we return!!

It certainly makes it even easier for us to come back !!

[21yearsoutofrsa]

I know this is a long time ago now, but I remembered this thread when I saw this article https://www.brisbanetimes.com.au/business/companies/david-jones-value-slashed-by-a-third-20180125-p4yyuu.html

 

South African retailer Woolworths Holdings has written down the value of its $2.1 billion investment in David Jones by a third, blaming the tough market and fashion missteps for the department store's waning fortunes.

The move is expected to heap pressure on fellow department store Myer, which has come under scrutiny over the valuation of brands and goodwill on its balance sheet.

Woolworths said overnight that it was recognising a $712.5 million non-cash impairment charge against the carrying value of David Jones, which it bought in 2014.

 

 

Tough trading conditions have been blamed for the write-down of David Jones.

Photo: Erin Jonasson

A spokesman said a "vast majority" of the write-down relates to goodwill. In June 2017 Woolworths valued its goodwill and brands at $1.5 billion.

"Today’s write-down reflects tough and unprecedented trading conditions, a cyclical downturn and structural changes that have impacted performance across the Australian retail sector," Woolworths said. 

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"This impairment has been exacerbated by delays and poor execution in certain of our key initiatives at David Jones."

David Jones' comparable sales fell 3.3 per cent in the six months to December 24, Woolworths said, but improved 0.6 per cent in the last six weeks of the half.

Comparable sales fell 0.7 per cent last financial year and the department store's profit slumped about 30 per cent.

Management blamed some of that performance on the poor quality of its private label fashion lines, which it said would be improved by moving management of those products from South Africa to its Country Road Group team in Australia.

Woolworths' board remained committed to the "transformation" of David Jones and would continue to invest in the business, the company said.

The revaluation comes amid challenging conditions in the retail sector which have hit department stores especially hard, with David Jones’ biggest rival Myer reporting a disastrous 5 per cent drop in sales for the first two weeks of December.

Myer has warned investors to expect its first-half profit to be "materially below" last year's $63 million.

Questions have also been raised about Myer's balance sheet and whether it needs to write-down the value of intangible assets.

In July 2017 Myer had a total of $985 million in intangible assets, including $465 million in goodwill and $422 million in brand names and trademarks, easily eclipsing its current market value of $513 million.

Morgan Stanley analyst Tom Kierath in December said that given Myer's poor financial performance, "we think the carrying value of goodwill and brand names must be called into question".

Myer was defended its accounting when quizzed at its November annual general meeting, while the Australian Securities and  Investments Commission was reportedly keeping an eye on the matter. 

On Thursday a Myer spokesman said the company would assess the carrying values of intangible assets "as part of the half and year end reporting process", including its half-year trading update on March 21. 

The corporate watchdog has previously called out sectors including media and resources in which the value of companies' assets are vulnerable to disruption, but has not singled out retail for scrutiny.

Last financial year Myer wrote down the goodwill of its Sass & Bide brand by $27 million, and wrote off the $6.8 million stake in had in Topshop’s Australian operations.

David Jones has said it is adapting to the tough environment by investing in new merchandising and customer relationship systems, renovating its flagship store on Sydney's Elizabeth Street and growing its upmarket food offering.

It has also moved its head office from Sydney to Melbourne in a move it expects to save $10 million a year.

 

[greggle]

On 1/26/2018 at 3:43 AM, 21yearsoutofrsa said:

David Jones has said it is adapting to the tough environment by investing in new merchandising and customer relationship systems, renovating its flagship store on Sydney's Elizabeth Street and growing its upmarket food offering.

 

Hopefully David Jones' profits are up a bit now that my parner and I have discovered their new Woolworths SA styled ready-meals, salads and preprepared veggies.

Their new food range is fantastic ... have you guys seen their Bondi food court? Amazing!

[Pell]

@greggle, I hope they roll out the ready-made meals to all Woolies. I don't care if they're more expensive, as long as I don't have to cook!