David Jones closes major city site
David Jones is slicing off a huge chunk of its presence at its flagship Bourke Street Mall, selling the six-storey menswear building.
The embattled department store chain will retreat the entire operation into the main complex across the mall, which will undergo a refurbishment funded in part by the expected $500 million gained from the sale and general proceeds.
Placing 299 Bourke Street on the market follows a miserable couple of months for David Jones as its South African owners Woolworths Holdings revealed a 42 per cent profit tumble and slashed the department store chain's value by $437 million.
The refurbishment mirrors plans for its Elizabeth Street store in Sydney where it's downsizing from two sites spread over 17 floors into one store with 11 floors and a foodie mezzanine, closing its Market Street branch and squeezing into the one premise.
Woolworths Holdings chief executive Ian Moir said the Melbourne flagship will follow a similar path.
"A single-store flagship housing the best local and international brands in one world-class destination will create a more seamless and cohesive experience for our customers," he said in a statement.
RELATED: David Jones profit drops 42 per cent
Woolworths Holdings bought the prestigious network of stores in 2014 for $2.1 billion as part of Mr Moir's plan to turn the company into a leading southern hemisphere retailer.
But the value of the beleaguered department store chain has shrunk to $965 million.
The chain has embarked on a transformational journey of re-sizing and store closures in order to save money but the cost-cutting endeavours have been hampered by a slowing Australian economy as property prices fell and consumer spending stalled.
Much like the smaller convenience-store style that Woolworths and Coles have been opening, David Jones has focused on smaller floor space in its new stores to modernise the shopping experience.
The miniature department store at Sydney's Barangaroo, which opened in late 2016, was the first of this fleet, with the South African-owned chain preferencing a layout of 1400sq m over two floors - one-10th the size of the chain's average department store.
This model allows both David Jones to offer a more curated range of products to suit a local demographic rather than trying to meet the needs of a broader market, Queensland University of Technology retail expert Gary Mortimer told news.com.au.
DGC Advisory retail analyst Geoff Dart said earlier this year downsizing and modifying the brands instore to increase profit margins wouldn't work because younger consumers didn't see any relevance in the brand.
"Which is why profits have been declining every year for 15 or 16 years. Revenue is not growing and that can only get worse," he said.
"It's a brand issue, it's like Coca-Cola trying to say they're healthy."
THE FANCY SERVO
David Jones announced earlier this week it would bring its food hall experience to service stations across the country as part of a major tie-up with BP, offering motorists more than 350 products, including rotisserie chickens, pre-prepared meals, sushi and sandwiches as well as fresh produce and long-life groceries.
The deal, the commercial terms of which have not been disclosed, will convert five BP locations in Sydney and five in Melbourne into swanky new David Jones-branded mini-markets over the next six months.
Additional sites will follow - there are around 1400 BP-branded service stations in Australia, 350 of which are company-owned. BP has similar tie-ups in more than half a dozen other countries, most notably with high-end UK department store Marks & Spencer, famed for its ready meals and gourmet sandwiches.
"We are investing in different parts of the business to set ourselves up for the future, and food is one of those areas," said David Jones Food managing director Pieter de Wet, who conceded "historically" its food halls weren't in the most convenient locations.
"BP's got a customer base that really overlaps with David Jones. What this partnership brings to customers is an opportunity to have our brand easily accessible. To build a sustainable food business takes a lot of time, therefore this partnership was appealing to us. It gets our brand out there. It's a key aspect of how we're going to grow our business going forward."