How David Jones went from Australia’s top luxury retailer to the latest private equity pick-up

David Jones’ South African owners Woolworths Holdings has agreed to sell the luxury retailer to Australian private equity firm Anchorage Capital Partners, eight years after splashing out $2.15 billion on the business and struggling to turn its fortunes around.

Woolworths Holdings (not related to the Australian supermarket chain) and Anchorage announced the sale on Monday afternoon, marking one of the most high-profile corporate handovers of the decade and ending years of speculation leveled at the South African company’s long-term intentions.

The precise cost of the deal was not disclosed.

The brand’s 43 stores across Australia and New Zealand, and its two distribution centres, will change hands in the deal.

Woolworths Holdings will retain ownership of the AAA+ Bourke Street Mall real estate housing David Jones’ current Melbourne CBD operations, and will lease the premises back to the brand.

The deal is expected to wrap up in May 2023.

In a statement, Woolworths Holdings said the company’s original visions did not come to fruition.

“Notwithstanding the commendable progress made in the turnaround of David Jones over the past two years, which has resulted in a significant improvement in the underlying operational and financial health of the business, WHL concluded that the David Jones business was no longer aligned to the strategic objectives of the Group,” it said.

“The strategic rationale at the time of the acquisition did not materialise to the extent originally envisaged,” CEO Roy Bagattini added.

“While David Jones has successfully executed on its turnaround, notwithstanding the COVID-19 disruptions, now is the right time for the business to operate under new ownership, while WHL refocuses on its core South African and Australian Country Road Group businesses.

The transaction “aligns with Anchorage’s investment strategy and its successful track record of executing complex carve-outs,” an Anchorage spokesperson said.

Current David Jones CEO Scott Fyfe is expected to stay on board through the transitional period.

Sydney Dance Company dancers perform during the opening of David Jones’ new shoe floor in Sydney, Thursday, October 4, 2018. Source: AAP/Erik Anderson.

David Jones: A timeline

1838: Welsh immigrant David Jones establishes a store in what would become the heart of Sydney. The premises, built on the intersection of George and Barrack Streets, prospered in its early decades, serving aspirational cityfolk and regional settlers alike.

However, the company says financial difficulties rose once Jones retired, and the department store to be handed over to trustees. Jones reclaimed his involvement, “borrowed heavily” to right the ship, in the company’s recollection, and tapped his son Edward Lloyd Jones to oversee its growth.

1887: A rebuild of the store’s Sydney home increased the company’s profile in the booming city. The four-storey complex helped David Jones offer a wider variety of goods; and a further two storeys were added in 1906, the same year it became a public company.

1927: The company opened its next Sydney store on Elizabeth Street, which remains the company’s most significant retail footprint in the city.

1947: Australia’s post-war boom allowed David Jones to venture up-market and establish itself as one of the nation’s pre-eminent luxury retailers. Over the coming decades, an increasing consumer appetite for high-end fashions and household goods, sourced from the international market, helped David Jones grow its national reach to dozens of stores in the coming decades.

1980: The decades after the war saw other retailers rise to prominence. Flagging fortunes in the 1970s saw David Jones withdraw from the Perth market owing to fierce competition from local retailer Aherns. The decade, which also saw the sale and redevelopment of its Sydney George St store, culminated in corporate powerhouse Adelaide Steamship (Adsteam) taking a stake in 1980. Its top dog, the powerful corporate figure John Spalvins, became chief executive. In doing so, control of the business fell out of Jones family hands.

1982: David Jones bought out Melbourne department store Buckley & Nunn, including its flagship premises on Bourke Street Mall.

1990: Adsteam’s 1989 bid for Industrial Equity, which included Australian supermarket chain Woolworths, saw the enterprise take on $600 million in debt. A year later, an analyst’s report on the company found Adsteam was sitting on $1.8 billion in assets and $7 billion in bank debt.

What followed was one of Australia’s most significant corporate collapses. Matters were not helped by a recession and significant downturn in retail optimism through the early 90s, as more shoppers sought value over luxury.

1995: In the ensuing chaos, David Jones was floated as a public company in 1995. Planning the pricey refurbishment of several key locations to re-capitalise on its luxury image, the company moved to sell some of its other properties and lease them back later in the decade.

2003: David Jones enjoyed a headstart in the Australian e-commerce scene, establishing an early webstore in 2000. But it was shuttered in 2003, as the company deemed the costs of fulfilling online orders was too significant to maintain. It would be a decision future leaders would come to regret.

2014: Another tumultuous decade for retail saw the rise of fast fashion and the continual rise of online shopping. And in 2014, the South African group Woolworths Holdings (not related to the Australian supermarket chain) bought David Jones in a $2.15 billion takeover.

Woolworths Holdings previously scooped up Australian brands Country Road and Witchery, and viewed David Jones as a legacy business capable of harnessing new ideas and energy.

2016: Some of those new ideas manifested in a New Zealand expansion into Wellington in 2016 (that store is now closed). Auckland followed in 2019.

2017: Woolworths Holdings planned to invest as much as $100 million into developing David Jones’ private-label food offerings, building on its food hall operations in Sydney, Melbourne, Adelaide and Perth. The company built out the chain’s food hall model with standalone premises through 2019.

David Jones will roll out the range at 10 BP service stations in Sydney and Melbourne. Source: David Jones.

2020: The COVID-19 pandemic hammered those food plans — and retail more broadly. 2020 was also the year South African shareholder declared Woolworths Holdings had struggled to turn its new luxury outlet into a money-spinner, declaring it “a very poor acquisition”.