Fears for iconic retailer David Jones amid a ‘perfect storm’ of troubling retail conditions

A retail expert has warned that department store giant David Jones could “finally falter” amid a perfect storm of poor economic conditions and continued hardship facing the iconic Australian brand.

Dozens of employees will be affected after the company announced one of its flagship stores at the Eastland Shopping Center in Ringwood, in Melbourne's east. would close from January next year.

The move will leave just seven David Jones stores in the Victorian capital.

Some fear the latest move could sound the death knell for large-scale Australian department stores across the country, amid a perfect storm of inflation, rising costs of living and poor foot traffic, putting pressure on sales.

But retail marketing expert Louise Grimmer said such conversations were “cyclical” and that department store chains could “rise like a phoenix from the ashes”.

“This time around, however, the economic outlook is particularly bleak, with enormous pressure on household budgets and discretionary spending,” said Dr Grimmer, a senior lecturer at the University of Tasmania.

'Furthermore, wages in this country have been stagnant for a number of years… and at a very bad time, with interest rates continuing to rise in the run-up to Christmas.

“These factors may be a perfect storm that could ultimately rock David Jones.”

There are 42 David Jones stores across the country, employing more than 7,500 people.

The announcement of Ringwood's closure is the latest in a series of setbacks for the Australian-based chain.

In 2020 it closed its Fortitude Valley store in Brisbane after just three years of trading.

The company's boutique Barangaroo store in Sydney was shut down after opening in 2016 at the height of the 2020 Covid-19 pandemic.

Last year, the only David Jones store in Wellington, New Zealand, closed.

Dr. Grimmer said a solution would be for the department chain to “get back to basics” – by improving service and reorienting itself as a “luxury company” rather than being “middle of the road”.

She pointed to the “woeful” service in David Jones department stores across the country and how it struggled to differentiate itself from brands such as Myer or even Kmart.

'Somewhere along the way the brand has lost its meaning – it now tries to be everything to everyone – offering both high-quality products and more affordable options,' Dr Grimmer said.

“(If) David Jones wants to continue offering expensive, high-end luxury products, they need to have the in-store experience, the online experience and the customer service to match.

'Currently all these elements are out of balance.

“Many specialty store competitors are winning the race – both in-store and online.”

In a statement, a spokeswoman for David Jones reiterated that the company was “focused on delivering world-class products and experiences… both online and in-store as Australia's largest omnichannel retailer.”

“Key to delivering this experience is our ongoing retail network optimization program, which includes refurbishing our stores, right-sizing and, where necessary, consolidating our footprint,” the spokeswoman said.

The spokeswoman confirmed the Eastland store would be closed from January.

“Our strategy was shared broadly with our team members and customers in January 2023, and we will continue to provide updates as we develop and grow our business,” she said.

The spokeswoman did not answer questions about the number of stores closed across Australia.

She also did not say how many staff would be affected by the closure of the Eastland store, but stated: “We are going through a consultation process and 97 percent of our team members have redeployment opportunities.

“We look forward to welcoming our Eastland customers online and at our other nearby retail locations.”

The 185-year-old Australian department store brand was bought by South Africa's Woolworths Holding Ltd (WHL) for no less than $2.14 billion in 2014.

But last year it was sold to Sydney private equity firm Anchorage Capital Partners.

David Jones' iconic Bourke St store in Melbourne – worth about $250 million – was not included in the deal.

“This new partnership has added new strength to the world's oldest continuously operating department store, and we're excited to seize the momentum and take our rightful place as Australia's most iconic shopping destination,” said David Jones chief executive Scott Fyfe in March last year.

“With the support and financial commitment of Anchorage, we have secured the right investment to lead Australian retail into the future.”

In its 2023 annual reportWHL Group stated that despite the sale, David Jones has contributed one of the highest revenues to the Group since the acquisition in 2014.

The report says the company has raised US$3.3 billion ($267 million) in cash and retained the Bourke St property, which is worth US$250 million.

David Jones was sold for US$1.1 billion ($89 million), the document said.

'The sale also enabled us to remove $R22 billion ($A1.7 billion) of liabilities, including $R18 billion ($A1.47 billion) of lease liabilities, from our balance sheet, further strengthening the Group's balance sheet strengthened and our financial performance figures were improved. WHL Group interim chief financial officer Zaid Manjra wrote.