David Jones is taking longer to pay clothing suppliers, but the department store chain has denied that its losses, stretching into the tens of millions under its private equity owners, are to blame.
The 188-year-old brand reported a $74 million loss for the 2024 financial year โ its first full year under the ownership of private equity group Anchorage Capital Partners โ and has begun taking longer to pay for the goods it sells.
Department stores have been under pressure in Australia and abroad, with the major American brands Saks Fifth Avenue and Neiman Marcus collapsing in the United States earlier this year amid pressure from online outlets.
Data obtained from CreditorWatch shows that David Jonesโ payments to its suppliers is 16 days overdue on average compared to seven days for the entire sector, though the company had no payment defaults, according to the credit agencyโs data.
David Jones confirmed that there have been changes to its payment terms with suppliers.
โAs part of this transformation, we are streamlining our operational and financial processes to build a stronger, more efficient, and more sustainable business model. This includes implementing a new supplier payment process โฆ and updating our standard payment terms,โ the spokeswoman said.
โRetail is cyclical, and David Jones is well positioned to navigate current trading conditions while continuing to innovate and invest for the future. David Jones has a proud heritage, and we are very confident about our future,โ a spokeswoman for the retailer said.
More significantly, the company reported a shortfall between cash reserves and other short-term assets, and short-term liabilities in its two most recent financial accounts. This indicates potential financial trouble if it failed to raise money to cover these bills as and when they fell due.
The 2024 financial accounts for David Jones also included more than $151 million in finance costs.
But David Jonesโ board expressed confidence in the businessโs ability to continue as a going concern, citing its โcash and access to undrawn facilities to continue to meet its debts as and when they fall due,โ the 2024 financial accounts said.
Anchorage acquired David Jones in 2022 for $100 million from South Africaโs Woolworths Holdings. It invested $250 million in the department store operator to boost its performance with a new shopping app and improved online shopping experience, and an alliance with Qantas Frequent Flyer last year to enhance its David Jones Rewards loyalty program.
โCustomers are already seeing the benefits of these initiatives, which lay the foundation for long-term growth and shared success,โ the retailer said.
David Jones has not released its financial accounts for the year ending June 30, 2025, but its chief executive Scott Fyfe told The Australian Financial Review last year it will make another financial loss. But he expressed optimism about the current financial year.
โ2026 will be better. People have come to live with cost-of-living pressures, which are now falling. I think the economy will be more prosperous,โ he said.
Those hopes have been dashed with high inflation, and tight employment, triggering interest rate rises this year.
On top of this, the Iran conflict is sending petrol prices soaring and is expected to add further inflation pressure to Australiaโs cost-of-living worries.
This is on top of the rising competition which has squeezed David Jones and its traditional rival, Myer โ as well as local online retailers. They are all failing to keep up with ultra-cheap retailers like Temu and Shein.
โLegacy online retailers like eBay and Kogan, as well as major department stores Myer and David Jones, are losing shoppers as they struggle to compete with value-focused retailers and online marketplaces, reflecting shifting consumer preferences toward lower prices and more convenient shopping experiences,โ researcher Roy Morgan said this month.
There is a lot on the line for Anchorage. It was widely criticised for its disastrous handling of the Dick Smith Electronics business.
Anchorage acquired Dick Smith from Woolworths for $94 million in 2012 and floated it on the ASX for $520 million 15 months later. The retailer collapsed in January 2016, with shareholders who bought the business from Anchorage losing their entire investment.
Last year, Anchorage refinanced David Jonesโ debts with a new $190 million finance facility offered by a syndicate headed by Gordon Brothers, a Boston-headquartered investor that specialises in distressed lending.
Last year, Gordon Brothers acquired Barbeques Galore for a nominal sum, as well as its debt from the Commonwealth Bank. The business collapsed last month and is now for sale by receivers appointed by Gordon Brothers.
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Colin Kruger is a senior business reporter for the Sydney Morning Herald and The Age.Connect via email.
