Speculation about a sale of David Jones,which is owned by South African retailer Woolworths Holdings,kicked off last week after the withThe Australian reporting Goldman Sachs was helping negotiate a sale of the business.
Speculation about a takeover of David Jones has emerged this week after the department store reported its full-year financial results.Eamon Gallagher.
David Jones declined to comment to this masthead on whether it had fielded any offers,but Andrew Forrest’s Tattarang and private equity operator Anchorage Capital have been touted as potential buyers.
Meanwhile,news this week that fellow department store Myer had appointed Jefferies Australia as advisors suggests that it too is monitoring the M&A buzz closely. Myer’s major shareholder,Solomon Lew’s Premier Investments,has gradually increased its stake in the company. However,any private equity suitor of David Jones could also be interested in snapping up Myer.
The uptick in investor interest in the sector raises the possibility that Australia’s department store market could be ripe for consolidation,with Myer and David Jones potentially owned by a single entity.
Myer investor Wilson Asset Management said a merger of the two retailers could work.
“We absolutely think it[a merger of Myer and DJs] would make sense. There is a lot of real estate that could be consolidated,” portfolio manager at Wilson,Oscar Oberg,said.
“The synergies,I assume,would be very,very large.”
Retail expert and professor at Queensland University of Technology,Gary Mortimer,agreed that in the current environment it would make sense for a buyer to bring the two brands together.
“There are certainly economies of scale if you merge the two,deal with one set of suppliers and develop a sophisticated private label range,and focus on[retail] experience,” he said.
Retail historian at Macquarie University,Dr Matthew Bailey,said any future buyer of David Jones would have to work out what edge department stores have over other bricks-and-mortar retailers,however.
“The longer-term issues facing department stores of intense quality competition in every product category that they sell,” he said.
“The question of relevance is to find what their competitive advantage is.”
David Jones and Myer have both expressed optimism in recent months about consumer spending,with Myer forecasting strong profit numbers while David Jones recorded a slight decline in profits due to the effects of lockdowns in 2021.
David Jones boss Scott Fyfe said on Tuesday that while there is no doubt the economic outlook is uncertain,the retailer is showing a post-COVID bounce back.
“Interestingly,what our results across the last year or so have shown is that,outside of a lockdown environment,customers flock back to their retail purchases in a big way with steadily building footfall and consistently increasing online shopping traffic,” he said.
Retail analysts agree that no matter how ownership of the stores plays out in coming months,both David Jones and Myer have strong brand equity.
Oberg said if the two companies were to come under the same ownership,he expected both brands could continue to operate rather than a new company identity being established.
“ I think there is still a lot of goodwill in the brands. But there’s a question of whether you’d need a Myer and a David Jones in the same block,” he said.
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