David Jones goes into administration, with store closures expected and thousands of jobs at risk

David Jones goes into administration, with store closures expected and thousands of jobs at risk Future of Australia’s upmarket department store in jeopardy after years of steep losses, and outer suburban and regional locations vulnerable

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Australia’s premier upmarket department store David Jones has collapsed into voluntary administration, putting thousands of jobs at risk amid warnings “difficult decisions” lie ahead to salvage the 188-year-old retailer.

The upheaval follows years of steep losses and underperforming stores that left the heritage retailer falling behind on rent, culminating in a breakdown of negotiations with its primary landlord, Westfield owner Scentre Group.

Staff were informed on Thursday that the David Jones board had appointed administrators from McGrathNicol, before the retailer’s main financier promptly installed FTI Consulting as receivers.

Under the dual appointment, FTI will take day-to-day control of operations, while administrators McGrathNicol seek a buyer or fresh injection of capital.

Christopher Hill, of FTI Consulting, said the process allowed for “an opportunity to restructure the business”.

“We will manage this process carefully, mindful of the impact on some stakeholders but also recognising the need for difficult decisions,” Hill said.

The process will almost certainly trigger immediate store closures, though receivers will try keep the core network open.

Analysts expect closures to hit outer suburban and regional mall locations hardest, likely sparing premier CBD flagship stores.

David Jones employs more than 6,000 staff across a network of 38 stores.

The David Jones chief executive, Erica Berchtold, said there was a “well developed plan on how to reset the business” and that the retailer would work with the administrators, receivers and its secured lender.

Creditors are scheduled to meet next week, according to the Shop, Distributive and Allied Employees’ Association.

The national secretary of the SDA, Gerard Dwyer, told the ABC the top priority was to retain as many jobs as possible.

“We do not want to see the end of David Jones, so perhaps it is a smaller model that then rebuilds and goes from there,” Dwyer said.

“Smaller is better than no David Jones, and a smaller David Jones can then deal with some of the challenges that they’ve obviously been facing.”

The administration could leave unsecured creditors with substantial losses, with unpaid product suppliers, some of which had already begun redirecting stock to their own retail outlets, and shoppers holding unredeemed gift vouchers most at risk.