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David Jones sales will drop 35.8% in the eight weeks to the end of April.
Food and clothing retailer Woolworths has announced the sale of another property in Australia in hopes of further strengthening its balance sheet.
The sale of the David Jones Elizabeth Street property in Sydney, Australia, was announced on Monday for A $ 510 million (about R5.6 billion).
“The board … believes that the proposed transaction will further strengthen David Jones’ balance sheet and support the repositioning of the business to create shareholder value,” Woolworths said in a statement.
This follows the sale of its Bourke Street Menswear building, which generated A $ 121 million that the retailer had used to reduce debt.
In August, then-newly appointed CEO Roy Bagattini said Woolworths had been overwhelmed since it acquired David Jones six years ago. The group said they had a plan to turn their luck around.
The group’s head of strategy and investor relations, Jeanine Womersley, said at the time that it has initiated a review of its capital structure, which includes a full assessment of options related to the Australian property portfolio, with the view that any product generated will be applied to debt reduction.
Woolworths said in a November trade update that in Australia, the return to stage 4 lockdown in the state of Victoria between August 6 and October 28 resulted in unplanned store closures. This reduced David Jones sales by 11.7% compared to the first 20 weeks of the 2020 financial year. Country Road Group sales decreased 10.9%. Excluding Victorian stores, Woolworths said sales for David Jones and Country Road Group grew 6.7% and 6.5% respectively.
The group said on Monday that the sale of the David Jones Elizabeth Street property in Sydney was also intended to facilitate the separation of existing combined and secured Australian debt and the David Jones and Country Road financial facilities.
This will be done through the conclusion of new secured debt and financing facilities by David Jones and Country Road independently. In addition, the transaction will also facilitate the termination of the existing cross guarantees between David Jones and Country Road.
To achieve these objectives, Country Road and David Jones will fund separately from each other and each respective group will not guarantee or cross-guarantee the other, except for certain intangible support from David Jones to Country Road resulting from the total proceeds of the sale of the property. being welcomed into David Jones’ group, the group said.
The Cape Town-based retailer said none of the South African entities within the group will guarantee Country Road or David Jones with respect to the new financing agreements or the lease.
“The funding that Woolworths made available to Australian companies, as announced on May 27, 2020, remains in force and is not withdrawn,” the group said.
Woolworths established a clearly stated lease for the property. It includes an initial term of 20 years, along with five options to renew the lease, each for an additional term of 10 years.
Upon concluding the deal, the group said, ownership of the property will be transferred to the buyer, but subject to the terms of the lease, and all rights, titles and interests in the selling entity of David Jones will be vested in the buyer.
