David Jones sale: Elizabeth St $400million renovation in Sydney was beginning of the end for store

The outgoing owners of iconic Australian department store David Jones spent a whopping $400million on renovations just two years before selling the struggling business for a quarter of what the revamp cost – in another disastrous loss for the company.

Woolworths Holdings Limited (WHL), which has no relationship to Australia’s Woolworths supermarket chain, bought the upmarket store in 2014 for a whopping $2.1billion.

But less than eight years after the purchase, the South African-based conglomerate was forced to sell the business to Australian company Anchorage Capital Partners on Tuesday for as little as $100 million.

The sale means Woolworths Holdings Limited suffered a net loss of at least $2billion in less than a decade.

But factoring in other money spent by the company, the measly sale price sounds even more painful.

Just two years before selling David Jones, the company boasted about the $400million it had spent upgrading its Sydney flagship store on Elizabeth Street.

The coronavirus pandemic soon followed, forcing the store to shut its doors for months during lockdown.

Recently departed owners of David Jones spent $400million on its flagship Sydney store to boost offerings of luxury designer labels in 2020, four times the amount of its recent sale to Anchorage Capital

David Jones said the $400million remodelling of its Elizabeth Street store was to create a ‘distinguished selection of luxury beauty and designer accessories at a destination like no other’ (David Jones Sydney pictured) 

According to a statement on its website, David Jones said the renovation ‘brings our 180-year legacy into the present through innovation and inspiration, curating the best fashion, accessories and beauty from at home and around the world’.

The works included a remodelling of the ground floor of the store, described as a ‘distinguished selection of luxury beauty and designer accessories at a destination like no other’.

The expansion of luxury offerings was an attempt at getting the store on the world stage by modelling its revamp on overseas tourist hotspots such as Harrods, Galeries Lafayette in Paris and Saks Fifth Avenue in New York, as well as a response to competition from high-end online fashion sites.

David Jones hosts ritzy designer brands from around the globe including Gucci, Louis Vuitton and Balenciaga.

During the $400million renovations in 2019, Woolworths Holdings revealed David Jones profits had plummeted 42 per cent in the year ending June 30

Woolworths Holdings’ profits more than halved between 2015 and 2019, falling from $161million to $37million, forcing the owners to write down the business by more than $1.1billion. 

David Jones suffered a devastating $33 million loss in 2020.

At the time the $400million revamp was taking place, Woolworths Holdings revealed in August 2019 that the company’s profit had plummeted 42 per cent, from $64million to $37million in the 52 weeks to June 30.

Company chief executive Ian Moir said at the time he believed David Jones could still survive despite another recent slashing of $437million off its value, while blaming recession conditions in the Australian retail sector.

‘I think we can outperform the market, we have got to start getting the benefit of all the money we have spent on systems, stores and people … it has been a really tough three years, but we will get through it,’ he told The Australian.   

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 David Jones’ profits rebounded strongly in 2021, but Covid lockdowns in NSW and Victoria crushed sales in the first half of 2022 as it closed 70 percent of its stores 

Anchorage Capital Partners said it aims to continue the turnaround of the department store and its subsidiaries 

But the recent sale suggests the 184-year-old retailer did not bounce back and the Covid pandemic had contributed to the downfall in its already ravaged profits.

David Jones’ profits rebounded strongly in 2021, but further Covid lockdowns in NSW and Victoria crushed sales in the first half of 2022 as it was forced to close 70 percent of its stores. 

Anchorage said it aims to continue the turnaround of the department store and its subsidiaries. 

David Jones had previously been expected to sell for about $130million.

Its Melbourne CBD store – which has not been included in the sale- is now worth twice the amount of the rest of the chain and valued at as much as $250million. 

The giant retailer operates 43 stores in Australia and New Zealand, two distribution centres and a growing online business. It currently employs around 7500 people.