Woolworths to take a hit on David Jones reassessment


Woolworths to take a hit on David Jones reassessment

Published Date: 2018-01-25 | Source: Stephen Gunnion | Author: Stephen Gunnion | Comments

Woolworths to take a hit on David Jones reassessment

The retailer is writing down about a third of the value of the Australian department store chain due to changing conditions in the sector

Woolworths says it's writing down the value of its investment in Australian department store chain David Jones by A$712.5 million, which will result in the retailer reporting a first-half loss. It says the cyclical downturn and structural changes have impacted the performance of Australian retailers. On top of that, the execution of some of its own key initiatives at the chain has been "poor" or "delayed". It paid A$2.1 billion for David Jones in 2014.

In an updated trading statement yesterday evening, Woolworths said it expected to report a 240% to 250% fall in earnings per share for the 26 weeks to 25 December. That will result in a loss per share of as much as 517.7c. The loss has been magnified by the sale of the David Jones Market Street property in the prior period for a A$172.6 million profit. Stripping out the non-cash impairment, headline earnings per share (HEPS) will be 12.5% to 17.5% lower than the previous year, while adjusted HEPS will be down by between 7.5% and 12.5%.

Last week, Woolworths said its fashion, beauty and home sales in South Africa had decreased by 0.2% over the period, with comparable store sales down by 3.4% and price inflation of 0.7%. Food sales did a lot better though, jumping by 9.4%, with comparable store sales up 5.3% and price movement of 4.4%. That helped lift group sales by 2.5%. In Australia, Woolworths said David Jones' sales picked up in the last six weeks of the period but were 3.3% lower on a comparable half-year basis. Country Road's sales were up by 5.2%. Stripping out store growth and the acquisition of Politix, sales were down by 1%.

Related article: Little Christmas cheer for Woolworths

Woolworths' shares closed 2% lower. Its statement was released after the close of trade.

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