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David Jones, the world’s oldest department store still trading under its original name, has fallen into administration after failing to reach agreement with its owners on a restructuring plan.
The collapse of the high-end chain which has 38 stores across Australia and New Zealand comes as the critical Christmas period approaches.
The retailer, which is owned by Australian private equity firm Anchorage Capital Partners, appointed administrators McGrathNicol on Thursday and held a public meeting with staff.
Administrators said the process would provide “respite” as they sought bids for the business and weighed “difficult decisions” to restructure the business known as “DJs”, which employs 6,000 people.
The company, founded in 1838 by a Welsh immigrant, holds a prominent place in Australian retailing. It hosted a banquet for Queen Elizabeth II in the 1950s at its flagship store on Elizabeth Street in Sydney and moved upmarket in the 1980s when the advertising slogan “There’s no other store like David Jones” was first used.
However, the retailer has struggled to maintain its appeal this century and has changed hands several times. Woolworths, the South African retailer, paid A$2.1 billion ($1.5 billion) for David Jones in 2014 and sold it to Anchorage nine years later for A$100 million.
The collapse comes amid a deterioration in Australia’s economy following five interest rate hikes this year, and a number of retail chains having already gone bankrupt.
The impact of David Jones’ administration could also have wider ramifications for the supply chain across Australia, with some small businesses owing tens of thousands of dollars.
This situation casts even more doubt on the viability of the department store business model. David Jones competes with Myer in Australia, but both have struggled in recent years, while BHS and Debenhams have disappeared from the UK’s high streets.
Erica Berchtold, who was named chief executive of David Jones in June, said in the administration’s statement that the retailer had a “well-developed plan on how to reset the business for the future” and would work with administrators to pursue those options.
“David Jones is an iconic company and many Australians have stories and memories of visits to DJ’s stores and I thank customers, our team members and partners for their continued support of David Jones throughout this period,” Berchtold said.
The company negotiated with owners a plan to downsize and close stores, but hit an impasse this week, triggering the administrative process.
Scentre Group, owner of the Westfield malls where many David Jones stores are located, said this week that the retailer has not paid rent since October and that Anchorage rejected a “generous offer” to keep the business going.
YTL Starhill Global Reit, the Singapore-based owner of David Jones’ Perth store, said the retailer was S$1.3 million ($1 million) in arrears and had held discussions about reducing the size of its outlet.
Hilco, the American fund, is the main secured creditor of David Jones after having lent him more than 200 million Australian dollars at the start of the year. Hilco provided an additional A$10 million in capital last month to enable the business to continue operating during the key Christmas period.
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