Australia's oldest department store, David Jones, went into voluntary administration on Thursday after 188 years, a process similar to business rescue here. Rising costs, sluggish retail sales and supply chain pressures had weighed on the business, and its receivers also pointed to a large, outdated store footprint. It's no longer owned by Woolworths, but South Africans might remember that Woolworths spent an absolute fortune buying it.
A R21.4 billion bet on a southern hemisphere champion
Back in 2014, Woolworths paid R21.4 billion for David Jones, a 25.4% premium to its share price. The plan was to create a leading southern hemisphere retailer and make Woolworths one of the top 10 department store groups in the world. As then-CEO Ian Moir put it, the aim was to grow "a southern hemisphere champion from our South African base." Woolworths even expected the combination to generate at least R1.4 billion a year in extra earnings within five years.
Online shoppers and an R11 billion write-down
But things went badly wrong. Australians were increasingly shopping online, the economy was sluggish, and poor fashion choices pushed shoppers towards competitors. While sales dwindled, Woolworths had to pump money into David Jones, paying for its debt and store leases. By 2019, it had written more than R11 billion off the value of the investment, and News24 reports the total reached R13 billion before the sale, more than half the purchase price. The leadership churned too: when David Jones's CEO resigned in February 2019, he was the fourth in five years.
Shareholders were furious, with some urging Woolworths to sell David Jones and fire Moir, who had pushed the retailer into Australia. For years, Woolworths defended the write-downs as "noncash", but some investors argued that shareholders' cash had paid for the asset in the first place. Moir eventually stepped down in early 2020, leaving his successor, Roy Bagattini, to restructure the debt, sell property and close underperforming stores.
Bagattini then sold David Jones to Australian private equity firm Anchorage Capital Partners, in a deal announced in December 2022 and completed in 2023. Woolworths never disclosed the price, but it was reportedly up to R1.5 billion. As Bagattini said at the time, the strategic rationale "did not materialise to the extent originally envisaged." The sale removed about R22 billion of liabilities from Woolworths' balance sheet. It kept the Bourke Street flagship in Melbourne, but sold that property in 2025 too.
So when David Jones entered administration last week, Woolworths had already cut its ties, and says it holds no ownership interest in the business or its properties. The administrators are now seeking a recapitalisation or a sale as a going concern. And considering how much Woolworths lost on the original investment, selling when it did may have saved it from an even more expensive mistake.
