David Jones has entered voluntary administration and receivership for the first time in its 188-year history after failing to reach a more favourable deal with its largest landlord, Scentre Group.
Lender Hilco Global has appointed FTI Consulting as receivers and managers, who will now run the business and assess potential store closures prior to exploring a sale. Administrators McGrath Nichol will assess the retailer’s finances and review its damaged relationships with suppliers.
Eleventh-hour talks between David Jones and 17-store landlord Scentre Group, which operates Westfield shopping centres, are understood to have broken down following the retailer’s pursuit of a more favourable rental agreement. Scentre Group told investors and the media that it hadn’t received rental payments from David Jones since September 30.
Christopher Hill, David McGrath and Joanne Dunn have been appointed receivers and managers of ACP Riley Street Midco Pty Ltd, the parent company of David Jones Pty Limited.
The gross rent for Scentre Group’s David Jones locations already stands at $352 per square metre, compared to the portfolio’s average gross rent for all stores of $942 per square metre. Scentre CEO Elliot Rusanow said the company had made a “generous offer” to David Jones prior to talks collapsing, which was rejected.
The Westfield operator had received all payments up to September 30, with bank guarantees of $45 million in place between David Jones and Scentre, following Anchorage’s 2023 acquisition.
Stores at Westfield Parramatta, Hornsby, Southland, Woden and Carousel are among those with doubtful futures, according to reports.
The process will most likely see the investment from private equity firm Anchorage Capital Partners, which bought the business for about $100 million, wiped out. Both Anchorage and Hilco have long maintained their commitments to financially supporting David Jones.
“David Jones is an iconic company, and so many Australians have stories and memories of visiting DJ’s stores,” said CEO Erica Berchtold in a statement. “I thank customers, our team members and our partners for their continued support for David Jones through this period.
“We have a well-developed plan on how to reset the business for the future and will be working with the administrators, the receivers and our secured lender as we continue to pursue that reset of the business.”
Anchorage Capital had previously cited a “prolonged period of weak consumer confidence and significant structural change across the department store sector” among the reasons behind David Jones’ struggles.
“We understand the current retail trading environment, rising costs, a significant and outdated retail footprint, and supply chain challenges have led to this point,” Christopher Hill added.
“Voluntary administration and receivership provide breathing space and an opportunity to restructure the business. We will manage this process carefully, mindful of the impact on some stakeholders but also recognising the need for difficult decisions.”
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