‘We still have a plan’: David Jones to shut 19 stores, thousands of jobs to go

David Jones will axe half its stores and leave thousands of workers without jobs after the peak Christmas trading period, as the receivers in charge of the embattled department store owner attempt to resuscitate the 188-year-old retailer by shrinking its footprint.

On Wednesday afternoon, the company told staff and suppliers of the sweeping restructure that will shut 19 stores in coming weeks, saying the drastic cuts were necessary to give David Jones the best shot at a long-term future.

David Jones Parramatta, one of the stores that will close after the peak Christmas trading period.James Brickwood“The business could not continue operating as it was. We had a plan to reset the business and we still have a plan to reset the business,” David Jones chief executive Erica Berchtold said in an email seen by this masthead.

“Put simply, our store portfolio is no longer the right shape for the business, and this change is about creating a network that is financially sustainable for the future.”

The closures include seven stores in NSW – Macquarie Centre, Macarthur Square, Parramatta, Wollongong Central, Hornsby, Green Hills and Warringah Mall, and three in Victoria – Malvern Central, Highpoint and Glen Waverley.

Woden in Canberra will shut, and stores in Western Australia to close are Hay Street Mall, Garden City and Carousel.

In Queensland, Robina Town Centre and Sunshine Plaza will close, as will West Lakes and Marion in South Australia. In New Zealand, the David Jones store in Newmarket will shut.

“The identification of stores to close is the result of a review conducted to ensure the business is sized appropriately and on a sustainable financial footing for the future of David Jones,” read the FAQ document issued to suppliers and seen by this masthead.

News of the closures comes after the retailer collapsed into administration last week, following the breakdown of last-ditch negotiations with its landlords. The closures will trigger thousands of job losses in David Jones’ workforce of about 6000.

In a statement, receivers from FTI Consulting said it had made a “difficult decision” to proceed with an “urgent restructure” in line with the plan put forward by David Jones’ owner Anchorage before the company collapsed.

“For the immediate term, these stores will continue trading, and while there is no final date for the closures, we anticipate they will cease trading by the end of the year,” FTI Consulting said.

FTI acknowledged the restructure was “highly regrettable” and would have a “material impact” on staff, but said it was committed to treating all employees with fairness and respect. “The steps are unavoidable if David Jones is to continue as a viable business,” the receivers said.

Gift cards can continue to be used, although new ones are no longer available for purchase. Gift cardholders have been redirected to register their claims in an online form.

In Parramatta, one of the stores to be shut, many employees were seen gathered in different groups discussing the closure. Other staff were spotted looking at their phones – shortly after the Herald reported the store would close – and hugging each other.

Julie, a regular shopper at the Parramatta branch, said she would miss having the store close by.

“It’s so sad. But sometimes, the decision must be taken to make it stronger in the future.”

Workers at David Jones in Warringah Mall on Sydney’s northern beaches were stocking shelves and serving customers when they learnt their jobs would go next month.

The message arrived from management on Wednesday afternoon, coming as news of the store’s closure broke in the media.

David Jones in Warringah Mall on Sydney’s northern beaches is one of the 19 stores to be shut.Jeremy PiperThe store was fully stocked on Wednesday, and is expected to continue normal trading until at least Christmas. It’s unclear whether it will be open for Boxing Day trade, but is expected to be closed by the end of the year.

Workers, many of whom had been at David Jones for several years, were seen consoling each other as they processed news of the closure.

One worker said staff were feeling “very sad” and “overwhelmed”, as they came to grips with the news.

The NSW secretary of the Shop, Distributive and Allied Employees Association, Bernie Smith, blamed the lost jobs on “bad management decisions” going back years and decades, and said the union had contacted other retailers for help in finding jobs for workers being let go.

“For many long-termers, their jobs with DJs have been a matter of pride if not love. And this is how that loyalty is repaid,” Smith said in a statement.

“They have continued to work diligently and efficiently with customer needs their absolute priority despite the continuing failures of management, which repeatedly hindered their ability to do their jobs.”

Senior union officials will meet David Jones representatives and administrators on Thursday.

Business Sydney executive director Paul Nicolau said the record level of foot traffic and sales over the weekend showed customers wanted to see David Jones survive and urged shoppers to continue shopping at the department store for Christmas.

“The total collapse of David Jones would be a very big blow for an economy that is already struggling, and it must be avoided if humanly possible,” he said.

Westfield operator Scentre Group chief executive Elliott Rusanow said there was high demand for shopping centre space and occupancy rates were at 99.8 per cent.

“Our business is practically full,” he said. “We have a unique opportunity at 17 Westfield destinations to introduce and grow local and international brands and experiences that our customers want. We will continue to pursue this strategy.”

It comes as documents released on Tuesday evening revealed David Jones’ private equity owners, Anchorage Capital, convened a meeting with representatives from insolvency specialist McGrathNicol and lender Hilco as early as July to look at restructuring options before further meetings in late October led to the formal appointment of voluntary administrators.

Representatives from each party met on July 27 to “discuss and understand David Jones Group’s financial performance and potential restructuring scenarios” and set up a working group to continue regular discussions, according to an initial report to creditors.

Months before, David Jones had asked suppliers to stretch payment terms out to 90 or 120 days, which sparked concerns about the department store’s ability to pay its bills.

Over several phone calls, meetings and email exchanges from October 22, Anchorage Capital representatives discussed the potential engagement of McGrathNicol as administrator and briefed them on negotiations with landlords.

Anchorage Capital paid $1 million upfront to McGrathNicol on November 4, with an agreement for a further $4 million expected to be signed “in the coming days”.

Suppliers, hundreds of which have gone unpaid after David Jones’ collapse last Thursday, have been invited to join a first creditors’ meeting at 11am on November 17.

The July meeting was not McGrathNicol’s first engagement in relation to David Jones this year.

In April, Anchorage Capital engaged the insolvency specialist via its law firm Corrs Chambers Westgarth. The law firm and McGrathNicol met eight times for a “review and analysis of limited financial information” of David Jones that month and in May this year.

McGrathNicol emphasised that this engagement was with Anchorage, not directly with David Jones.

In March, insurance companies were refusing to cover stock supplied to the struggling department store chain, raising fresh questions about its ability to stabilise its business.

In late April, a financial update from David Jones reported a significant increase in underlying earnings and sales growth that outperformed the broader retail sector, “signalling the most robust financial performance since its return to Australian ownership”.

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