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Woolworths Holdings is reviewing its South African apparel business and Australian unit David Jones’ food division to respond to fashion trends and contain losses amid falling profits, its chief executive said on Thursday.
Roy Bagattini, who took over as CEO of the fashion and food retailer in February, is on a mission to improve the performance of the David Jones department store chain. His predecessor, Ian Moir, paid a premium to grow in Australia and make the company a leading retailer in the southern hemisphere.
“Although some progress has been made, our David Jones business just hasn’t transitioned quickly enough,” Bagattini told analysts Thursday during a presentation after Woolworths reported a 65% drop in annual earnings.
Woolworths announced a review of its Australian real estate assets in May, a process that would include debt restructuring.
On Thursday, Bagattini announced a series of new plans, giving investors a glimpse into his thinking regarding the Australian business.
While launching a partnership with BP Garage to attract convenience shoppers was progressing well, David Jones’ larger-format food business continues to make a loss and requires review.
At the very least, Bagattini said he expects the review to bring the company “to an equilibrium position during fiscal 2022.”
Woolworths has also launched a series of “cost reduction” initiatives to eliminate at least A $ 20 million ($ 14.6 million) of costs from Australian companies on an annualized basis.
The company said it had received several non-binding offers for the sale and leaseback of David Jones’s remaining real estate, which would help the unit reduce loan needs and pay off debt.
Woolworths, who also owns the Country Road brand, said it was also reviewing the strategy and execution of its fashion, beauty and home business in South Africa. The goal would be to “fix and reposition” a division riddled with bad-fashioned “mistakes” in the past two years, she said.
Bagattini said that while poor execution was to blame, Woolworths’ challenges lie in strategy, which for too long ignored young, vibrant and aspiring new clients.
“As a business, we haven’t evolved fast enough and that has left us somewhat behind the curve,” he said.
The review will seek to address relatively long and inflexible lead times – the time it takes to produce the clothes – to better react to rapidly changing customer trends, he said.
