David Jones suppliers mourn store closures but back plan to shrink network to fewer, stronger stores

For five years, a Spice brand called Lord and Lion has sat on shelves in every David Jones store in the country. Its owner, Eresha De Zoysa, now expects to lose a significant slice of her business. On Wednesday, receivers for the 188-year-old department store announced plans to close 19 of its 38 stores, a week after the company went into administration.

De Zoysa says the closing stores gave her something she cannot easily replace: access to customers in communities she would not otherwise reach. She accepts that many of those stores may not make commercial sense for David Jones or for its owner, Anchorage. But her products sold well in them. It is a sad day, she says, and she will have to be cleverer about finding those shoppers another way.

The structure of the collapse is split between two firms. McGrath Nicol has been appointed administrator of David Jones, while FTI Consulting has been appointed receiver for Hilco, the company's biggest lender. In an email to suppliers, seen by the ABC, chief executive Erica Berchtold said the store portfolio was no longer the right shape for the business and that the aim was a network that is financially sustainable. The 19 closing stores are expected to trade through the peak seasonal period, with final trading days anticipated later in the year. The email said the business could not continue as it was, and that a plan to reset it remains in place.

Several suppliers back the shrinking. Carlos Martins, who owns the men's fashion brand Coast Clothing, calls closures the right way forward and expects fewer stores to be better for him over the long term. He believes loyal customers will move to online shopping, where his brand will get more exposure than it had in stores, where it was not present. Jacob Leung, whose handwoven blanket business Slowdown Studio is not stocked in any of the closing stores, called the news sad but good for suppliers. He acknowledged the impact on employees and on the communities losing their stores. Still, he said, the current business model is clearly not working, and suppliers want David Jones to win because then they win too.

The harder question is money. Documents seen by the ABC show an uncertain future for suppliers who have been asked to keep supplying the retailer despite debts that remain unpaid. Mahala Joyce, co-founder and director of distribution business Over The Fence, has organised pop-ups in David Jones flagship stores for international brands including Bellroy and Topologie. Like other suppliers, he negotiated 14-day settlement terms carrying a 5.75 per cent discount. Across three purchase orders over six months, he says, none was paid on time, yet the discount was still applied. He describes it as a systemic flaw, since the system applies discounts at the start, before any payment date. The ABC has seen relevant documents.

Joyce nonetheless considers closing stores the right move. He says it was broadly known that about 19 locations were loss-making, and that people he spoke to inside the business thought a network of 12 stores in the long run would be very solid. But he argues the retailer must fix customer service. It can close stores and repair vendor relationships, he says, but until it delivers on the service promise its brand built in Australia, the market will be tough. If it does deliver, he believes it can be a strong player.

De Zoysa, a former corporate lawyer who has worked in administration and previously advised David Jones, has no doubt a restructured company would succeed. She hopes suppliers can renegotiate an outcome that lets them keep supplying, because, in her words, it is the brands that make David Jones worthwhile. What to watch now: whether those renegotiations happen amid the unpaid debts, and whether a smaller David Jones can win back both its vendors and its shoppers.