David Jones has collapsed into voluntary administration for the first time in its 188-year history, leaving 6,000 jobs and nearly 500,000 square metres of retail floor space in uncertainty after last-minute rent negotiations broke down with Westfield operator Scentre Group.
The final collapse was triggered by a missed rent payment of about $5 million for November across the retailer’s store network. Scentre put forward a proposal that involved holding off on rent for November, December and January while lowering future lease obligations through closures spanning 2027, provided that October’s rent was settled during the current year. When David Jones subsequently missed another rent deadline on Sunday, November 1, and paid other landlords instead, Scentre viewed the action as a rejection of its restructure proposal.
While a buyer is sought, the company will be overseen by administrators who will likely shutter some loss-making locations. The future of its more than 5,600 employees is still unclear. Chief executive Erica Berchtold addressed staff at the company’s Melbourne headquarters, stating that the company has a well-developed plan to work with administrators and receivers and reset for the future. The board voted to appoint voluntary administrators, and British lender Hilco appointed receivers and managers to take control of operations.
Small Brands Face Unpaid Invoices from Department Store
Small Australian brands and suppliers found themselves stuck near the bottom of the creditor pile, revealing that the department store had been months behind on payments before entering administration (The Guardian), according to Theguardian. Fledgling label Beysis dispatched a restock worth tens of thousands of dollars in April, only to face months of silence regarding unpaid invoices. Similarly, K Juliet founder Chloe Barry-Hang stated that her fashion company remained unpaid for three-quarters of its first purchase order after launching in stores just weeks prior. Suppliers were told they held no legal rights to reclaim unsold stock currently remaining on shelves.
Under a dual appointment, FTI Consulting assumed day-to-day operational control as receivers appointed by British lender Hilco Capital, while McGrathNicol took over as voluntary administrator to seek a buyer or fresh capital injection (The Guardian). Chief executive Erica Berchtold stated that leadership had developed a well-structured plan to reset the business and would collaborate closely with the appointed administrators, receivers, and secured lenders (ABC News).
Acquisition Brings Heavy Property Commitments and Financial Strain
The retailer’s financial strain intensified following its acquisition by Anchorage Capital Partners in December 2022 for less than 5 per cent of the amount previously paid by Woolworths Holdings.
Property commitments across major shopping centres weighed heavily on the chain’s operating model. In 2020, a Charter Hall-led consortium acquired the Elizabeth Street flagship store in Sydney for $510 million under a 20-year lease agreement carrying an initial annual net rent of $25.5 million, alongside minimum annual increases of 2.5 per cent. Analytics showed David Jones was paying an average of $352 per square metre in rent compared to a retail market average of $942 per square metre, yet struggled to generate sufficient margins against rising operational costs and escalating digital competition (Daily Mail), according to Dailymail.
Experts Urge Gift Card Holders to Spend Vouchers Immediately
Retail marketing experts urged customers holding gift vouchers to spend them immediately. Macquarie University professor of marketing Jana Bowden cautioned that ordinary consumers holding gift cards rank as unsecured creditors at the bottom of the payout hierarchy.
You will be on the bottom rung and the last to receive anything, so use it now
Jana Bowden, professor of marketing at Macquarie University
While gift card holders can register their details with administrators, experts noted that the probability of recovering cash through that process remains extremely small.