Woolworths banks R2.1bn on Australian division

RETAILER Woolworths on Monday announced plans to invest up to R2.1 billion to develop a David Jones department store as it banks on the growing strength of its Australian subsidiary to boost its bottom line going forward.

Woolworths chief executive Ian Moir said: “The redevelopment of Elizabeth Street is an exciting milestone in the transformation of David Jones and will create a new benchmark in both Australian and global retail.”

Last month, Woolworths said it expected its bottom line to increase by between 15 to 25 percent for the full year.

Sales gained

For the 52 weeks to June, the listed retailer said group sales – excluding David Jones, which it bought in August 2014 for $2 billion (R27bn) – grew 12 percent. When the Australian outlet was added in, sales gained 16.4 percent.

The South African retail group said it had sold its Market Street property in Sydney to Australia’s Scentre Group for A$360 million (R4bn) and would be using up to A$200m of the proceeds to develop the 39 000 square metres adjacent Elizabeth Street building to offer “the best of fashion and food available in the southern hemisphere”. Woolworths said the redevelopment was expected to be completed in the second half of 2019.

In September, Woolworths appointed John Dixon, who led the turnaround of Marks & Spencer’s £5bn (R89bn) food business, as the chief executive of David Jones.

Woolworths said the David Jones head office, currently housed in the two Sydney buildings, would be relocated to Melbourne and consolidated in a new campus with the group’s other Australian subsidiary, Country Road Group. The company said it expected synergies and productivity benefits of at least A$10m a year from 2019.

Woolworths said the redevelopment was expected to be completed in the second half of 2019.

Woolworths said it had carefully considered the location of its Australasian corporate head office, including the completion of a detailed strategic and operational review. Melbourne was selected following an evaluation of the local retail industry, long-term costs, development opportunities, talent pool and proximity to other Woolworths assets, including the group’s distribution assets at Truganina.

Moir said: “This exercise is not about reducing headcount and saving employment costs.”

Woolworths forecast that its Australasian head office team would increase to 1 500 employees.

Woolworths shares gained 1.04 percent on the JSE to close at R90.13 on Monday.