David Jones, Australia's oldest department store, enters administration after 188 years

Voluntary administration and the appointments

On Thursday, 5 November, David Jones, which describes itself as the world's oldest continuously operating department store, entered voluntary administration after 188 years. The board appointed McGrathNicol as voluntary administrators, and the retailer's main financier installed FTI Consulting as receivers. Under that dual appointment, FTI takes day-to-day control of the business while it is restructured. The company employs more than 6,000 staff across 38 stores in Australia and New Zealand, 17 of them in Westfield shopping centres.

In a joint statement, the two firms set out the next phase:

“A transaction process seeking offers for a recapitalisation of the business or a sale as a going concern will commence immediately, and will be managed by McGrathNicol.”

The firms said they would manage the process carefully, mindful of the impact on some stakeholders, and that stores would keep operating while it runs.

A rent dispute with the landlord

Scentre Group, which owns the Westfield centres where David Jones has 17 stores, said the retailer had not paid its October rent and was therefore in breach of its tenancy agreement. That statement came hours before the board voted to enter administration. The retailer had fallen behind on rent after years of steep losses and underperforming stores, and talks with its primary landlord broke down. According to Scentre CEO Elliott Rusanow, Scentre had offered the chain a lifeline, but Anchorage Capital, the chain's owner, rejected it. Woolworths paid A$2.1bn for David Jones in 2014 and sold it to Anchorage nine years later for a reported A$100mn.

2014 purchase by Woolworths2,100

Reported sale to Anchorage Capital100

2014 purchase by Woolworths

2100 A$ million

Reported sale to Anchorage Capital

100 A$ million

Data from the article text

Retail pressures and the department store format

The collapse comes as the Australian economy sours after five interest rate rises this year, and several retail chains have already failed. Jana Bowden, who teaches marketing at Macquarie University's Business School, said the collapse marked the "death knell" for the department store format. She said the city flagship stores kept their upper-end image, while suburban stores had become mundane. The retailer had struggled with the shift to online shopping and fast-fashion rivals for more than a decade. In June, Saks Global, a US luxury department store owner, emerged from Chapter 11 after nearly five months with fewer than half its previous stores.

Stores, staff and possible closures

Employees at some concessions said they had been told to close up shop, with no details about the store or their own jobs. Some under-performing stores are expected to close imminently. Five stores in Westfield centres in Perth, Sydney, Canberra and Melbourne were among those whose closure has been considered. The union representing retail workers has made preserving as many jobs as possible, and securing redundancy payments and other entitlements, a priority. Some smaller businesses are owed tens of thousands of dollars, which could ripple through the supply chain. Christopher Hill of FTI Consulting pointed to a mix of causes:

“We understand the current retail trading environment, rising costs, a significant and outdated retail footprint, and supply chain challenges have led to this point.”

Hill said the appointments give the business breathing space to restructure.

Timeline and what comes next

The company was founded in Sydney in 1838 by Welsh immigrant David Jones. Woolworths bought it in 2014, rent for October went unpaid, and the board voted into administration on Thursday.

Chief executive Erica Berchtold said the company has a well-developed plan to reset the business for the future and will work with its administrators, receivers and secured lender. She said:

“David Jones is an iconic company and so many Australians have stories and memories of visiting DJ's stores.”

A transaction process to seek a recapitalisation or sale of the business starts immediately under McGrathNicol, ahead of the Christmas trading period.