Australia's department stores have long been part of the country's shopping rhythm, and now one of them has fallen away while its longtime rival watches from a more fragile distance. David Jones, the upmarket retailer, has entered administration under the weight of debt and leases and is closing roughly half its 38 stores. Its rival Myer, still sustained by a modest cash cushion, is leaning on discounts and acquired chains to hold its ground, and the question now is whether its sales strength is genuine renewal or only a postponement of the same decline.
David Jones Falls Into Administration as Rival Myer Faces Its Own Reckoning
Financially stronger, but strategically still pretty vulnerable.
Mark
Why does David Jones going under put Myer in the spotlight?
Mimi
They're old rivals with the same problems: leases on weak stores, shoppers who wait for sales, online competition. Myer's shares sit around 24c, so people are asking whether it's the next to fall.
Mark
But its sales hit $4.1bn. Isn't that good news?
Mimi
Not really. The growth came from buying Just Jeans, Jay Jays, Portmans, Dotti and Jacqui E from Premier Investments, plus heavy promotions that cut profitability.
Luke
Worth flagging that the article gives the acquisition as the source of the growth but no figure for underlying sales without it. We can't say how much the core business grew or shrank.
Mark
What does Myer have that David Jones didn't?
Mimi
Time. It finished the year with a $100m net cash buffer and has cut stores to 56 from 60 before the pandemic.
Luke
And the investor optimism about picking up David Jones customers is a bet, not a result. The share bump on administration day is the only evidence, and the article says the closing stores' clearance sales may hurt Myer short term.
Mark
Is permanent discounting a strategy or a trap?
Mimi
Analysts are split. Richard Hemming sees volume building a customer base that can later pay more.
Luke
That's one analyst's view of a hoped-for outcome. Brian Walker's verdict is more cautious: financially stronger, strategically vulnerable. Whether the turnaround works is simply unknown.
The Pulse
- David Jones has collapsed into administration, and nearly twenty of its stores face closure within weeks.
- Myer's $4.1bn in sales looks healthy on paper, but much of that lift came from absorbing apparel chains bought from Premier Investments.
- Heavy promotions are being used to pull shoppers in, yet they are eating into profit and leaving the brand worth far less than before.
- Myer's shares sit near 24c, and investors are betting its $100m cash buffer and rival's closures will carry it through.
- Every discount now is a bet that volume will eventually restore margins, and nobody yet knows whether that bet will pay.
Australia's department stores have long been part of the country's shopping rhythm, and now one of them has fallen away while its longtime rival watches from a more fragile distance. David Jones, the upmarket retailer, has entered administration under the weight of debt and leases and is closing roughly half its 38 stores. Its rival Myer, still sustained by a modest cash cushion, is leaning on discounts and acquired chains to hold its ground, and the question now is whether its sales strength is genuine renewal or only a postponement of the same decline.
Walk into a Myer store and the signs of distress are hard to ignore: slashed tags, constant discounting, floors that seem permanently on sale. It has the look of a closing-down sale, but the store that has actually fallen into administration is David Jones, Myer's longtime rival, which is shutting roughly half of its 38 outlets. The resemblance raises an uneasy question about whether Myer is next.
On the surface, Myer's numbers look strong. Sales climbed to $4.1bn last year, but the growth came mostly from absorbing apparel chains such as Just Jeans, Jay Jays and Portmans, bought from Premier Investments. Underneath, promotional spending ran higher than planned, profits were squeezed, and the company wrote down its brands by more than $200m. Its shares now trade near 24c, far below the $4.10 float price in 2009.
The wider forces are familiar. Online retailers have pulled in bargain hunters, specialists like Mecca have caught changing tastes, and both chains are burdened by long leases on weak stores. Cost-of-living pressure has trained shoppers to hunt for deals, and the old loyalty to one department store has largely faded.
What separates the two companies is time. David Jones collapsed under debt, while Myer has trimmed its network and holds a $100m net cash buffer. Analysts remain divided on whether discounting is a clever way to build volume and loyalty or a slow road to ruin. Myer's position may even improve, since roughly two in five of its stores sit in the same centres as David Jones outlets. But the closing stores are discounting heavily too, and cash-strapped shoppers are cutting back. As one adviser put it, Myer is financially stronger but strategically still vulnerable, and the test ahead is whether its cash lasts long enough for its online push and store cuts to work.
Walk into a Myer store these days and the signs of a department store in distress are hard to miss: slashed price tags, frantic discounting, whole floors that appear to be permanently on sale. It looks like a closing-down sale, but this is not David Jones, the upmarket retailer that has fallen into administration and is shutting half of its 38 stores. It is Myer, its longtime rival, and the resemblance has prompted an uncomfortable question about whether Myer is next.
At first glance, Myer's headline numbers seem to defy the gloom. Sales grew by double digits last financial year, to $4.1bn. But the lift did not come from surging demand. It came from adding the sales of apparel chains Just Jeans, Jay Jays, Portmans, Dotti and Jacqui E, which Myer bought from billionaire businessman Solomon Lew's Premier Investments.
Underneath, the picture is weaker. Myer's annual report says it ran "higher than planned promotional activity" to stimulate demand, and that cut into profitability. The company also wrote down the value of its brands by more than $200m in a single year, an acknowledgment that its labels are worth far less than they once were. Its shares now hover around 24c, a fraction of the $4.10 float price from 2009.
The market researchers at IBISWorld describe a "sustained erosion of relevance" for department stores over the past five years. Online platforms have won over bargain-hunters, while specialists such as the beauty retailer Mecca have proved more nimble in catching shifting tastes. Both Myer and David Jones have also been weighed down by long-running leases on underperforming stores in their sprawling networks. Cost-of-living pressure has added to the strain, entrenching what IBISWorld calls deal-hunting behaviour. The era when Australian families were fiercely loyal to one chain or the other is gone. Myer was contacted for comment.
Where Myer differs from David Jones is time. David Jones went into administration under mounting debts, while Myer ended the last financial year with a $100m net cash buffer. It has also been trimming its network and its lease liabilities, down to 56 stores from 60 before the pandemic, something David Jones is only doing now that it has collapsed.
For now, Myer is leaning into the discounts shoppers demand. Analysts are divided on whether permanent discounting is a smart survival tactic or a slow-motion route to bankruptcy. Richard Hemming, editor of Under The Radar Report, says that in retail "volume is everything": get the volumes through and the customer base can eventually pay more, and when volumes and margins both improve, the effect doubles. Department stores need to move large amounts of stock to keep cash flowing and clear seasonal goods, and discounts can sign people up to loyalty programs such as the successful Myer One scheme. Hemming argues Myer is "cleaning house earlier than rivals" because investors have long priced it as if it were going to go broke. Myer is also revamping the business to chase online sales aggressively.
Investors see a possible windfall. Roughly two in five Myer stores share a shopping centre with a David Jones outlet, and Myer's shares got a bump on the day David Jones entered administration, on bets that the coming closure of 19 David Jones sites will hand it market share. Yet the short term may hurt. The condemned David Jones stores are under orders to clear stock with widespread promotions, which will lure customers away. Broader retail sentiment is souring too, with a string of interest rate rises and escalating living costs forcing cash-strapped shoppers to cut discretionary spending.
Brian Walker, chief executive of the Retail Doctor Group, names financial flexibility as Myer's main long-term edge. "Whereas David Jones was incredibly encumbered, Myer doesn't have that issue right now," he says, adding: "As we sit here today, Myer is financially stronger, but strategically still pretty vulnerable." What to watch is whether Myer's cash buffer lasts long enough for its online push and further store cuts to take hold.
Notable Quotes
Whereas David Jones was incredibly encumbered, Myer doesn't have that issue right now.— Brian Walker, chief executive, Retail Doctor Group
In retail, volume is everything.— Richard Hemming, editor, Under The Radar Report
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