I want Australia’s two largest department stores to succeed. Although I do not see them anymore, I wish they would last. Not all department stores do.
In the United States, department stores such as JC Penny, Barnes, Sears and Neyman Marcus have all filed for bankruptcy in the last while, while in the UK Debenhams goes to management three times a year and seeks a buyer to avoid liquidation.
Myer and David Jones are a big part of Australian retail. They are big bosses with tens of thousands of employees and they are iconic Australian brands (even though David Jones now owns the sea).
If they can both survive, that is the best situation. But they need to adapt fast, because experience around the world shows that continuing to do the same things is a great way to die for department stores.
Department stores have been having a very hard time adapting to the new retail environment, but I was watching Myr and David Jones, and they were slowly making progress. Online sales crawled. From a very low base, of course, but rising. Mier replaced its CEO, David Jones, who was testing, placing David Jones branded food outlets in service stations, and trying to be relevant.
Myer and David Jones both managed profits for the 2019 fiscal year. Myers was slightly higher than the previous year, while David Jones was not, but it was upgrading its flagship Sydney store.
Then the corona virus hit. 2020 has come at the wrong time for these two big ships. They are definitely trying to come back, and then a storm came.
I shuddered at the recent financial statements of two large companies. Myr’s statement came out first, and it was a serious read.
Myr sales fell 16 percent. Although they approached Job Keeper and doubled their online sales, they declared a legal net profit of 2 172 million (including the cost of redundancy rounds and the value of brand names written off as 95 million).
Then the David Jones results came out. Their troubles began as soon as 2020 began. When Chinese tourism was banned, David Jones failed to make regular sales during the lunar New Year holidays. Shopping malls are empty and locked.
Although most stores are able to stay open, they do not see many customers. Sales fell 17 percent in the first six months of this year.
This is not as bad as it would have been without a big boost online. David Jones has doubled its online sales this year, and they accounted for 18 percent of total sales over the past six months. That is a sign of hope.
The whole point of department stores is to combine many things in one place so shoppers will find things they don’t know. But now we have the internet. People can find things they like online. Department stores need to be smart in online sales, or they will be beaten.
The other problem with department stores adapting to the new environment is when they are not exclusive partners of the products they sell. These days you have to be cheap if you are selling something that is available in many places. People can price Google. Uniqueness gives pricing power to big stores. That’s why Uniclo and H&M don’t sell Lewis and Nix. They sell their own brand because they don’t have to compete in price. Myr is now focusing on ‘Only at Myr’ products. That’s smart.
On top of its loss, the DJs are selling their property portfolio. I know businesses these days want to focus on their core capabilities, but there’s something about selling land from your own feet, and it’s risky. Its Bork Street store received $ 120 million. That money helps them adapt, but you can only spend it once. It’s gone, you still have to pay rent.
We hope here that David Jones and Myer will do the right things that can pay rent in the long run. This is not easy.