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Private equity firm Anchorage Capital Partners is reportedly in the final stages of acquiring David Jones from Woolworths Holdings, the South African retail giant that bought the department store chain for $2.1 billion in 2014. 

The Australian Financial Review reported on Wednesday that Woolworths Holdings’ deal with Anchorage Capital was imminent and estimated to be between $120 million and $130 million, a fraction of what the company paid for David Jones eight years ago. 

Multiple reports suggest the deal will be done by Christmas. 

Inside Retail contacted Anchorage Capital Partners about the reports, but they declined to comment. David Jones had not responded to Inside Retail’s request at the time of writing. 

Speculation about the sale of David Jones has increased in recent months, following reports in April that its parent company had been meeting with banks. 

It comes after a tough few years for the department store, which was impacted by forced store closures during the Covid-19 lockdowns, and a failed foray into food halls, which were shuttered after a strategic review in 2020. 

Scott Fyfe, the former CEO of Country Road Group, which is also owned by Woolworths Holdings, took over as CEO of David Jones in 2020. 

Since then, he has overseen the reinvigoration of the department store, including the refurbishment of its flagship stores in Sydney and Melbourne, and the exploration of new trends, such as fashion rental and resale. 

In 2021, the retailer reportedly turned a profit for the first time since 2018, thanks in part to a number of costly impairments coming to an end and the Australian government’s JobKeeper wage subsidies. 

In October, Woolworths Holdings’ CEO Roy Baggatini wrote in the company’s annual report that David Jones was “debt-free, self-funding, and has a clear roadmap to improving profitability”. 

As such, he wrote that Woolworths Holdings was now in a “favourable position to explore all future options in respect of this business, and how best to further unlock value for the group and our shareholders.”

According to the Australian Financial Review, Fyfe will remain CEO of David Jones after the sale is complete.

Brosa, the upmarket online furniture brand, has been placed in voluntary administration, citing a decline in trade since Covid-19 restrictions enabled consumers to shop at physical stores again. 

Last February, Brosa’s co-founder and CEO Ivan Lim told Inside Retail the business grew more than 100 per cent last financial year, in line with other online furniture retailers. 

Fuelled both by existing customers increasing their order frequency and average order value during the pandemic, and new customers, who sought out online furniture retailers when stores were closed, the company seemed assured of success, its sales tripling. 

“There’s still so much growth, and we are really fortunate that we built a leading position as far as a digital-first experience goes for home and living,” Lim said.

But this week the dream was over, with KordaMentha Restructuring commencing a sale process for Brosa, and Richard Tucker and Michael Korda appointed as voluntary administrators.  

“The business faced challenges when sales declined after the Covid-19 restrictions were lifted,” said Tucker. 

“This caused short-term cashflow pressures after a period of phenomenal growth.”

KordaMentha is seeking expressions of interest in the business as a going concern. 

Tucker said Brosa had developed a strong customer base and technological capabilities “that would be an asset to many other furniture retailers”. 

“I expect that there will be strong interest in the Brosa business. The company was embarking on a campaign to reduce its inventory holdings and refocus itself as a make-to-order business.”

KordaMentha is planning a stock clearance from the company’s warehouses in Sydney and Melbourne. 

David Jones, the country’s highest profile department store, is in the hands of private equity investors after its South African owner Woolworths Holdings sold the company to Anchorage Capital.

The firm has agreed to buy the David Jones operating business – without its flagship Melbourne property – and says it will accelerate its growth aspirations despite the retail sector facing significant economic headwinds in 2023.

David Jones chief executive Scott Fyfe, who will stay on to run the business, said there would be more investment in its stores and customer experience but refused on Monday to confirm if Anchorage’s playbook would include job losses among its more than 7500 staff once it officially grabs hold of David Jones in March.

Woolworths boss Roy Bagattini at a press conference on Monday declined to disclose the sale price for the David Jones business, saying it was “complex” and that final sale price would “become clearer” in March.

He also declined to explain if the final price Anchorage would pay for David Jones would depend on how the department store performs over Christmas, but described the sale price as “a little bit of a moving target”.

However, sources close to the transaction said David Jones had been sold for around $100m, crystallising substantial losses for Woolworths, which spent eight years trying to turn around the department store.

Woolworths will retain ownership of the flagship Melbourne CBD store, which could be worth as much as $250m. It is believed Woolworths will also attempt to extract as much as $200m in dividends from David Jones before it is handed over to Anchorage.

Woolworths acquired the then ASX-listed David Jones for $2.1bn in 2014, at the same time buying out businessman Solomon Lew’s stake in Country Road for $209m.Woolworths will keeping that business, which also includes the Mimco and Witchery brands.

The Australian first revealed that the South African company had brought in investment banks in the hope of offloading the department store in early April, a move denied by Woolworths.

In buying David Jones, Anchorage gets control of Australia’s premium omnichannel department store owner, with 43 stores and two distribution centres across Australia and New Zealand, as well as a rapidly growing e-commerce business.

Mr Fyfe told The Australian that the company was “back under Australian ownership and we are going to unleash the full potential of this amazing brand”.

“Anchorage has got a very clear strategy for the business, it is a growth strategy which is really important, they’ve obviously come on board with their financial capital investment in the business which is fantastic,” Mr Fyfe said, although he declined to rule out job losses.

“We need to set this business up as a stand-alone business now, so I think it will provide great opportunities for our people.

“I’m not in a position to say whether there will be or will not be (job losses) at this point in time and clearly that is a discussion I need to have with Anchorage.”

Anchorage declined to comment. The private equity firm has extensive experience in retail and consumer investments over 25 years. This includes Anchorage buying Dick Smith Electronics from supermarket group Woolworths for under $115m in late 2012 and then only one year later flipping it on the ASX for a value of $520m. Dick Smith later collapsed, leaving creditors owned hundreds of millions of dollars.

Mr Fyfe said there were a number of strategies Anchorage and his management team could pursue to resuscitate earnings.

“The first place is the capital investments. The last few years has been very challenging for us in terms of the recovery from Covid and we have been capital constrained as we have worked through these periods,” he said.

“So an injection of new capital is fantastic for us.

“And we will use that to prioritise on consumer facing areas, whether that is a customer, or omni-channel business perspective, or an online perspective.

“And we will really scale this business up for success and we can now move at pace. Clearly having an ownership structure in Australia is really beneficial for us. And we can go on and really maximise the opportunity.”

He said he wasn’t daunted by the feared slowdown in spending in 2023 as the impact of interest rate rises, spiking energy bills and soaring inflation threatened to curtail discretionary spending – especially at a luxury retailers.

“We are very clear about the headwinds that are coming, particularly recent interest rate rises that put challenges on consumer confidence and consumer spending,” Mr Fyfe said.

“We have got strong momentum, I’ve been really encouraged by our trading through Black Friday, Cyber Monday and into peak Christmas trading both from a physical and a digital perspective, probably actually more from a physical point of view because we really invest in our premium luxury assortment. We have actually seen consumers trading up.

“We are very aware of calendar year 2023 there will be some headwinds, and we are constantly focusing on value for money across this assortment we offer and making sure that customer base – who have got a higher affluence than the average in Australia – really stick with us.”.

Mr Bagattini, who was brought on board as CEO in 2020 to fix and ultimately sell David Jones, said the acquisition hadn’t turned out as initially envisaged.

“David Jones is just a phenomenal brand. It is an iconic retailer. It’s stature as an iconic retailer just goes on forever. And when you part company as it were there’s a level of sentimentality,” he said. “At the end of the day I’m feeling good about the fact that we are able to set David Jones up with a very positive opportunity to drive forward.”

He declined to name the actual total sale price, only saying it would be more than David Jones current value of $290m in its own accounts – which includes the Melbourne CBD store.

In the years following the acquisition, led then by former Woolworths chief Ian Moir, there were more than $1bn in writedowns. The company launched, and quickly ended, several strategic initiatives including opening dozens of David Jones food courts and locating food services in BP service stations.

The latest accounts showed David Jones had a net profit of just $14.5m in 2022, from $84.3m in 2021 – an 82.7 per cent decline.

It’s not by chance that the only person actually named in the press release announcing the sale of iconic department store David Jones to private equity firm Anchorage Capital Partners was Scott Fyfe, who has led David Jones since October 2020 and will continue to run the business for its new owners.

While sources said Anchorage managing partners Beau Dixon and Simon Woodhouse have led the transaction for the private equity firm over a marathon 18 month process, the pair was not speaking publicly following the deal.

This was a deliberate choice to emphasise how central Fyfe is to Anchorage’s decision to pay South Africa’s Woolworths Holdings Limited a reported $100 million for David Jones.

In the eyes of Anchorage, Fyfe is one of three keys to the turnaround that Anchorage hopes to execute.

Fyfe, who arrived in Australia in 2017 to run Woolworths’ other big Australian investments, Country Road Group (which also owns the Mimco, Witchery, Politix and Trenery brands), is seen as having built good relationships with the Australian retail ecosystem of suppliers and supply chain partners.

The veteran Scottish retailer, who spent 20 years at iconic British retailer Marks & Spencer, is viewed by Anchorage as having delivered the first stages of a strong turnaround at David Jones in the last year or so, tweaking the group’s store portfolio, reducing costs and improving customer experience.

Fyfe’s growth plan, which is called Vision 2025 and seeks to make David Jones a more integrated omnichannel retailer, will largely remain in place. But what Anchorage will bring is capital and focus – this is the second plank of the turnaround strategy.

Woolworths has been an increasingly distant owner of David Jones, both geographically and with the level of resources it has been prepared to inject into the business.

David Jones has clearly been more of an annoyance to the Woolworths board than an asset.

But for Anchorage, the David Jones turnaround takes centre stage. Rather than an owner making decisions from Cape Town with limited knowledge of the store network outside David Jones’ flagship Sydney and Melbourne stores, Fyfe can now call on an owner who is focused on making quick decisions, knows the entire business, and has capital to invest.

That is no small change.

Granular approach

The Anchorage camp emphasises that it will not be taking dividends out of the business along the way – all profits and cost savings will be reinvested into Fyfe’s turnaround plan.

A focus of this investment will be improvements to David Jones’ broader store network, not just its flagship stores. Taking a more granular approach to getting the right mix of range, staff and customer experience across every floor of every store, will be a big part of this process.

A good example is at the Warringah Mall store in Sydney, where Fyfe and his property team were able to work with the centre’s landlord to improve the operations of the store itself and the mall more broadly.

Ironically, Anchorage was beneficiary of this through the Brand Collective retail business it sold last year; Brand Collective had one of its Shoes & Sox children’s footwear stores at the mall, and noticed a clear pick-up in foot traffic after David Jones invested in store improvements.

This model of working with partners such as landlords and concession holders in David Jones stores to help fund improvements will no doubt be an important part of the turnaround.

The retail industry is legendary for its ability to use other people’s money to fund their own businesses, be it through supplier rebates, promotional levies, or jointly funded redevelopment deals.

Mostly, such deals reflect the symbiotic relationship between retailers and landlords, and between retailers and brands – all parties need each other to prosper.

But as we saw when the Dick Smith retail business collapsed in 2016 – two years after Anchorage sold out – in part because it became too reliant on supplier rebates in its procurement, such relationships do need to be carefully managed.

The final plank of Anchorage’s David Jones turnaround is the brand’s heritage, which manifests in a large and loyal customer base and an unusually loyal pool of employees, who will be key to accelerating Fyfe’s turnaround plan.

Unique challenges

As private equity firm TPG found with its purchase and sale of Myer in 2009, owning and running an iconic retail chain brings its own unique pressures.

But the flip side of that coin is this is not some investment in a mid-sized industrial business that no one cares about – consumers will feel invested in Fyfe and Anchorage’s plans to improve customer experience, and integrate online and bricks and mortar channels in seamless ways.

Those customers – who are typically more well-heeled than your average consumer – may also be important in weathering any economic downturn next year.

Of course, history can be a burden too, and the track record of private equity in retail in Australia is hardly anything to get excited about.

As The Australian Financial Review’s retail guru Sue Mitchell pointed out recently, private equity-backed retailers that have collapsed or gone into voluntary administration in the last decade include Harris Scarfe, Seafolly, Tigerlily, Crumpler, Ginger & Smart, PAS Group, Colette by Colette Hayman, TM Lewin, Toys R Us, RedGroup and Dick Smith, which went under two years after Anchorage sold a controlling interest.

The counterpoint to that is Anchorage’s recent experience with Brand Collective, which Simon Woodhouse chaired. The firm was able to help the footwear retailer reset its business and then grow, with particular success in online sales, a category that was previously seen as an omnichannel laggard.

Anchorage held that business for seven years before it was sold to Larry Kestelman’s private family office last June.

While the COVID-19 pandemic did interrupt that sales process, the view from inside the Anchorage camp is that there is no deadline on an exit from David Jones. The firm sees this as a back-to-basics turnaround that will require time.

That’s sensible. Recent history says hunting quick wins in a business like David Jones – extracting outsized dividends, cutting costs too hard, failing to reinvest in a retail sector that is in constant flux – only creates pain down the track.

The reported terms of this transaction are evidence enough of that; Woolworths paid $2 billion for this business and will walk away with an estimated $500 million, the vast majority of which will come via a deal to sell the underlying property of David Jones’ Bourke Street store in Melbourne.

In the retail sector, building resilience and sustainable profitability is a slog. Anchorage’s capital will be crucial for David Jones, but its patience could be even more important.

Grocery giant Woolworths is preparing to move further down the four-legged, feathered and furred route, homing in on a deal to invest in dog and cat food and pet accessories business PETstock.

It is understood Woolworth is in late-stage talks to take a major stake in PETstock and invest alongside the group’s Victorian founders and management team.

Sources said PETstock had sounded out a number of potential investors, before focussing on recent efforts with Woolworths.

Having got out of pubs and pokies (at least as far as business lines go) and petrol in recent years, pets are emerging as a growth engine for Brad Banducci’s team. The country’s biggest and most valuable grocer has been pushing further down the pets route, trying to capitalise on increased pet ownership and owners’ propensity to spend more on their animals.

Woolworths’ pet interests start with petfood and accessories sold in its supermarkets, which makes it one of the biggest players in the sector, and includes its controlling stake in specialist online retailer PetCulture. It also has a pets JV with insurer Hollard Group.

Adding PETstock, or a stake, would be another way for the retailer to attack the market.

PETstock was founded 20-years ago by brothers David and Shane Young, who owned Ballarat Produce and started PETstock to expand their horizons.

Round of a-paws

The group has grown significantly, hitting nearly $700 million in sales and $54 million in profit before tax in the 2022 financial year. Revenue was up from $524.7 million in FY21, while profit increased from $29 million, according to accounts filed with the corporate regulator.

The group had $161.4 million net assets at July 2, its balance date. The biggest balance sheet line items were right-of-use assets and liabilities (leases) worth close to $240 million, while it had nearly $12 million in cash and $95.7 million inventories.

The accounts told a story of a healthy and fast-growing retailer. The group saw a $2.5 million increase in cash during the year, with a strong operating resulted matched by growth initiatives like buying out stores and paying for property, plant and equipment.

Woolworths declined to comment on its interest in PETstock on Sunday.

The potential deal comes only five months after PETstock acquired Best Friends Retail, a specialty pet retailer across eastern Australia, for $180 million. The group settled the acquisition using renegotiated loan facilities.

PETstock also acquired Pet City in Western Australia in July for $31 million.

Fashion platform The Iconic has launched The Iconic x FNFD Incubator Program for First Nations designers.

The collaboration is an extension of The Iconic’s long-term cooperation with FNFD (First Nations Fashion + Design), which combines the brand’s e-commerce experience and worldwide network as part of Global Fashion Group (GFG), with the insight and perspective FNFD provides from their community participation and industry impact.

The 2023 Incubator Program was created as a prototype to establish the tone for young creatives. Fashion designers, jewellery and accessory designers, graphic artists, and textile artists from various backgrounds and generations are eligible for the program.

“Interest in First Nations fashion has exploded in recent years, with designers like Nungala Creative and Clothing the Gaps piquing the interest of the mainstream with considered, sustainable and beautiful designs that pay respect to country and culture,” said Grace Lillian Lee, founder and CEO at FNFD. 

The Iconic says the collaboration is an important aspect of the brand’s Indigenous Engagement strategy, which was recently unveiled as part of The Iconic and GFG’s People & Planet Positive vision. The 2030 strategy offers five strategic pillars that are intended to achieve positive environmental and social transformation while also caring for its people.

Expressions of Interest for the co-designed Incubator Program are now being accepted until January 15 but may close early due to overwhelming demand. People can learn more via this website. 

In August, The Iconic debuted a new feature that allows consumers to resell previous purchases in collaboration with the re-sale platform AirRobe.

When customers buy their preloved Prada or hand-me-down Hermes from fashion marketplace Vestiaire Collective this Christmas, they’ll be helping the environment in more ways than one.

The preloved luxury fashion marketplace, which sells brands suchs as Balenciaga and Burberry, has joined forces with Australian carbon-neutral shipping company Sendle to provide consumers with a more affordable and sustainable parcel delivery service.

“The cool thing about our partnership with Vestiaire is they’re also a B Corp, and they’re really about sustainable, preloved fashion. So, they share strong values that align with us,” Moody said.

B Corp Certification is a classification that a company is meeting high standards of performance, accountability and transparency across all parts of its business. For a company to get B Corp Certification they need to meet high social and environmental benchmarks.

“With Vestiaire you’re going to save money [and] you’re going to get it delivered to you in a way that’s taking full responsibility for all the carbon emissions,” Moody said.

A growing number of consumers, including those in the Australian market, are turning to preloved or up-cycled fashion rather than contributing to the throwaway culture of fast fashion. Joint research from Boston Consulting Group and Vestiaire found that since 2020 the secondhand luxury fashion market had tripled in size, and that the resale fashion market is worth between $100 billion and $120 billion worldwide.

The partnership with Vestiaire is the latest of many for Sendle, which already has ties with companies such as ebay and Shopify, and comes as the company expands into the Canadian market following its launch in the US in 2019.

Despite debuting in the US just before the COVID-19 pandemic, Moody said the business had exploded, and the decision to catapult it into Canada came from an obvious gap in the market, which reminded him of Australia when they started in 2014.

“Canada is very similar to Australia, where there’s just one big monopoly provider, and we are creating choice,” Moody said.

“It’s [Sendle] cheaper, we will pick it up from you, and it’s 100 per cent carbon-neutral, and it generally gets there faster.”

The difficulty, however, isn’t in providing people with a better option, it’s about telling people there is an alternative. For that, word-of-mouth can be the best tool.

“Small business networks are really, really big... our purpose is built around unlocking network capacity so small businesses can compete... and then after that we start to look for partnerships.”

As for the future, Moody said more expansions were on the horizon and there was no ceiling for the business in terms of prospective markets.

“I think country expansion has been like a muscle, and we are learning how to flex that muscle a bit more,” he said.

“Our vision is to be the largest small business courier in the world. We believe very much around levelling the playing field for small businesses, and we see that as an opportunity everywhere.”

Strand has begun its new concept store rollout with the launch of its Melbourne-based Highpoint flagship on December 10.

The new concept rollout will see an increase of each store's square meterage by 2023 and will run across its 268-store portfolio. By 2026, Strand is expected to grow the total square footage of their stores by 52%.

Strand’s new Melbourne flagship is the retailer's largest at 380 square feet, and includes a new layout designed to hero the brand’s revised fashion-forward strategy.

The in-store experience includes improved visual merchandising, digital integration and dedicated sections to showcase Strand’s range of in-house and external brands.

Its features include a concierge assisted service model, with handbag stylists and luggage advisors, and a one-on-one service bar that allows customers to engage with the Strand team. Shoppers will also be able to choose click and collect pickup and secure pre-orders on upcoming new arrivals.

Digitally, the new concept includes Mobile POS, where customers can pay anywhere within the store, and staff will be equipped with headsets to improve customer service and team cohesion. Digital screens have been added to all customer touchpoints to boost range viewing and to share promotional offers.

A window into the back-of-house wrap and pack station for online orders is also included.

Strand Group CEO Felicity McGahan said her team recognised a need to evolve the business in order to attract a new generation of fashion-forward customers.

“Our customers told us our in-store experience was lacking, with too much clutter and too much going on,” McGahan said. “We listened, and took onboard their feedback. Everything that we’ve introduced is considered and customer driven, from layout right through to concierge-style customer service and modernised point of sale.

"Our incredible new flagship store at Highpoint is the culmination of bringing the new brand strategy to life, blurring the lines between physical and digital and giving our curation of brands the room to shine for the customer.

"With dedicated branded zones, enhanced digital innovation and an elevated customer experience, we know that the blueprint for this flagship sets the perfect tone for the evolution of Strand stores moving forward”

Strand’s new Melbourne flagship follows its rebranding strategy, marked by a brand name change last month from Strandbags to Strand. The brand is preparing for new initiatives to strengthen its rebranding into a new category, which it calls Fashion Travel.

Strand’s new flagship store is located on Level 3 of Melbourne’s Highpoint Shopping Centre in Maribyrnong.

The brand originated in Sydney, Australia in 1927. It is currently celebrating its 95th anniversary.

The Australian Retailers Association has welcomed the NSW State Government’s Back to School voucher program, saying it will provide financial support to small businesses and many families across the state.

From today, NSW parents can access $150 worth of vouchers through the program on uniforms, textbooks, stationery and other school essentials.

ARA CEO Paul Zahra said spending vouchers will help offset cost-of-living pressures and boost the retail economy.

“We warmly welcome this initiative, as an extension of the highly successful voucher programs previously introduced by the NSW Government,” Zahra said. “The ARA held ongoing discussions with the government through the pandemic about the power of government vouchers – we are grateful to have a government that listens to business feedback and responds.”

Zahra said that vouchers help bring people into shops, driving a positive flow-on effect for retail and surrounding industries.

He added that the Back to School season is an important time on the retail calender, with this year falling during high inflationary pressures.

“No doubt many NSW residents will appreciate the thoughtful approach as they consider their budgets with cost-of-living pressures continuing to bite,” he said.

“This is a powerful way to not only support budget-conscious NSW families but to also support small business and keep the retail and business economy moving in these challenging times.”

NSW Premier Dominic Perrottet said the summer holidays are a good time for families to start buying supplies for the new school year..

“The NSW Government wants to make sure every child attending school has the opportunity to strive for their best when they are in the classroom and providing access to essential items for learning is our priority,” Perrottet said.

“Parents, guardians and carers, including foster carers, can apply for three $50 Premier’s Back to School NSW Vouchers per child, which can be used at registered businesses towards items including bags, shoes, prescribed textbooks and lunchboxes.

“The end of year is an expensive time for many households with Christmas and family holidays to pay for which is why the NSW Government is investing $193 million into the vouchers to help ease those cost of living pressures.”

Treasurer Matt Kean said the NSW Government understands getting ready for the new school year can be expensive and encouraged parents to take advantage of the vouchers to reduce the costs of buying new school gear.

“From small uniform shops to larger stationery retailers, the pick-up from business has been strong already with more than 500 across the State registered to accept the vouchers and more expected in the coming months,” Kean said.

“Not only are the Back to School NSW Vouchers a big help for families in getting kids equipped with what they need, they’ll provide a real shot in the arm for businesses across the state too.”

Minister for Customer Service and Digital Government Victor Dominello said people can start applying for the vouchers from today, until they expire on 30 June 2023, giving everyone plenty of time to take advantage of the savings.

“Applying for the vouchers is simple and can be done in a matter of minutes using the Service NSW app, on the phone or by visiting a Service Centre,” Dominello said.

“Parents and carers can search for registered businesses in their local area by using the online Business Finder Tool and can use multiple vouchers in one transaction.”

The Premier’s Back to School NSW program is one of more than 70 government rebates and vouchers available through the Savings Finder program.

Woolworths, which also owns The Country Road Group, paid $2.1 billion for David Jones in 2014 and has since made over $1 billion in writedowns and sold the rest of its property portfolio to repay debts. It also was hit hard by the pandemic with rolling store closures.

The last significant jewel in David Jones’ crown is the Melbourne Bourke Street store – valued at about $250 million – which is in the middle of a major facelift. Under the deal, David Jones will enter a long-term lease for the flagship on market terms.

It is believed that any sale of this store – which sits on 3,984 square metres of land and 25,000 square metres of net leasable floor space – would occur when the CBD market was in better shape.

JLL head of capital markets Josh Rutman said Melbourne’s Bourke Street mall was going through a revitalisation where several buildings were being repositioned with the view of taking advantage of the next property cycle in the CBD.

“There is a good story for the mall. But potentially there is more value in the future based on the activity in the precinct,” said Mr Rutman, who was involved in the sale of David Jones menswear store across the road in 2021.

A clean exit

“There has been a huge influx in international capital taking advantage of the real estate market in Victoria. They see an upside for Melbourne real estate coming out of that post pandemic period.”

The David Jones sale would result in a clean exit after a near decade of ownership under Woolworths, which is being advised by Goldman Sachs. David Jones’ equity value on Woolworths books today sits at $289 million.

Anchorage, which is being advised by Rothschild & Co, plans to back Mr Fyfe and his team, and support his strategy to upgrade stores to create a more seamless omnichannel experience and cut unpopular brands while adding others. Mr Fyfe took over in October 2020 – making him the fifth CEO at David Jones in just five years.

Phil Cave’s private equity firm has made several high-profile deals in the retail space including Brand Collective, the footwear businesses which housed Volley and licensed brands such as Hush Puppies and SuperDry, and Shoes & Socks kid’s shoe chain.

Anchorage grew Brand Collective’s online sales from less than five per cent of total sales to greater than 20 per cent while managing a network of over 100 stores. In 2021, the firm sold the combined entity to Larry Kestelman’s LK Group.

But many investors in the sector have had trouble looking beyond consumer electronics retailer Dick Smith, which ended in heartbreak for creditors and left consumers holding $20 million in unused gift cards high and dry after it went under.

Anchorage snapped up Dick Smith for just $20 million from Woolworths in 2012. It introduced a new CEO, and went about its turnaround strategy that included introducing KPI dashboards rolled across all stores linked to staff incentives, opened a Hong Kong sourcing office for private label products, cleared out old stock and created a new digital platform.

The company’s $520 million initial public offer in late 2013 was lauded as a success. But just two years later the retailer fell into administration leaving creditors more than $260 million short.

Those close to Anchorage said Dick Smith’s performance was significantly improved during PE ownership, including a stronger balance sheet.

Mr Fyfe recently told The Australian Financial Review that David Jones was in a strong position to maximise profitability in the years ahead and be a leader in omnichannel retail. Woolworths flagged in November that sales increased by more than 55 per cent in the first 20 weeks of the new year. 

The positive start came after it posted a $14.5 million profit in full year 2022 and sales of $2.06 billion. Normalised earnings were up 18 per cent to $107 million.

One senior investment banker not involved in the deal called Anchorage’s IPO of Dick Smith “a masterful exit around the timing of working capital”.

The banker, who regularly works on complex special situations, said there would “likely be a massive operational slash and burn” at David Jones when Anchorage takes control of the 184-year-old department store.

The investment banker added that given the tough outlook for retail next year, perhaps being outside public markets was “not a bad thing” for David Jones.

Fast-fashion retailer Shein has filed confidentially with US regulators for an initial public offering that could take place next year, according to a person familiar with the matter.

The online retailer, which was founded in China but is now headquartered in Singapore, is working with Goldman Sachs, JPMorgan Chase & Co. and Morgan Stanley on the listing, said the person, who asked not to be identified because the filing wasn’t public.

Representatives for Shein, JPMorgan and Morgan Stanley declined to comment. A spokesperson for Goldman Sachs didn’t immediately respond to a request for comment. The filing was reported earlier by Shanghai Securities News.

Shein (pronounced “she-in”) has become popular thanks to its trendy clothing at ultra-low prices. The company has been hoping for a valuation of as much as $US90 billion ($136 billion) in a US IPO, Bloomberg News reported earlier this month. Shein’s estimated sales now far surpass Zara and H&M in the US fast-fashion market.

At the same time, Shein has come under fire for poor labour conditions in factories it partners with, overproduction of poor quality garments and the use of cotton from a Chinese region accused of using forced labour. US senators have written to Shein chief executive officer Xu Yangtian (also known as Chris Xu) to request more information on the labour claims.

The criticism hasn’t stopped Shein’s meteoric rise among shoppers all over the world.

Last year, Shein opened distribution centres in the US, Canada and Europe to accelerate shipping times in those regions. It has also begun to expand manufacturing in Brazil, Turkey and India.

Speed is the Chinese company’s defining characteristic, anticipating the tastes of Western teenagers and catering to shifting preferences almost instantaneously using artificial intelligence and ultra-quick supply chains.

Shein’s founders’ roots in online marketing are key to the company’s success. Through real-time data and algorithms, Shein identifies hot items and adjusts production to keep inventory rotation and delivery speedy.

It was the pandemic that turbocharged growth as teens and 20-somethings stuck at home and often on limited budgets turned to the company’s ultra-cheap online offerings. More than half of its customers are from Gen Z, those born between the late 1990s and early 2010s.

The retailer offers a wide range of products under $US10, and suppliers need to deliver new designs in around 10 days, even faster than Zara’s famous three-week turnarounds. 

Shein has drawn audiences across Europe and the US — its dominant markets — with its viral “clothing haul” videos, featuring influencers modelling “dream wardrobes” with pieces starting at $US3. The videos ricocheted across TikTok and YouTube during every major shopping season, with Shein releasing thousands of items weekly. The company sprinkles its marketing with star power through virtual concerts hosted by major celebrities.

In 2018, Shein’s value was $US2.5 billion. A year later it had doubled, and now it’s eyeing a $US90 billion valuation. As Shein’s growth took off, its CEO Xu, born in China’s eastern Shandong province in 1983, built one of the world’s great fortunes. The 40-year-old is now worth about $US21.5 billion, according to the Bloomberg Billionaires Index, which estimates his stake in Shein at about one-third.

Australian Christmas retail sales are predicted to exceed $60 billion, despite the impact of inflation and cost of living problems, according to research from the National Retailers Association (NRA).

Covering the pre and post-Christmas shopping periods, that figure would represent a 3.9 per cent increase over last year.

Quoting the organisation’s Consumer Sentiment Report, interim NRA CEO Lindsay Carroll said buyers are preparing for the holiday shopping season by modifying their spending habits in order to afford Christmas events and gifts.

“It’s clear people still want to feel special and have those great experiences but rather than indulging in costly goods and services, shoppers are planning ahead to score bargains in the upcoming sales events,” she said. 

Meanwhile, the Australia Retail Association (ARA) says Australian retail sales increased 12.9 per cent in October compared to the same time last year, with sales climbing 28.2 per cent on pre-pandemic levels.

“Retail performance this year continues to be outstanding, despite a dramatic drop in consumer confidence due to inflation,” said Paul Zahra, ARA CEO. 

Zahra said the Delta lockdowns of a year ago were a “driving factor” in the surge, and predicted the “strong sales momentum” is encouraging for the most important retail trade season of the year, Christmas.

Online retail anticipates another “strong” year of growth due to shifting consumer behaviour and the growing appeal of occasions like Cyber Monday. People want to finish their holiday shopping before December, and bargain sales events are becoming more common, enabling customers to research products and make purchases at any time and from any location.

Carroll said retailers should be encouraged that there are still customers out there willing to spend their money this season – “but more than ever they are looking for bargains, for great shopping experiences and for smooth transactions,” she said. 

However, once the Christmas festivities are over, the ARA forecasts sales will fall next year. The most pressing trading difficulties for retail right now, he said, are debilitating workforce shortages and managing ongoing supply-chain disruptions.

Retailers are overstocked and are ordering less from manufacturers as the economies of the United States and Europe slow markedly, and this will have a ripple effect on the entire global economy says the managing director of logistics giant Toll Group.

Alan Beacham, who was speaking to the Australian Financial Review Infrastructure Summit from Singapore, said Toll was already noticing lower orders from retailers in the US and Europe, which were adjusting inventory levels downwards as demand from consumers slowed.

“Retailers are overstocked, so they’re ordering less,” Mr Beacham said.

“This means you’re going to see an even further slowing next year in terms of those orders into the manufacturers, which kind of creates a ripple effect into global trade,” he said.

He said a “perfect storm” looms next year because inflation will still be a big issue as consumer demand declines. “Demand will be down, so we have that perfect storm of a lower top line and an increasing cost line,” he said.

The warning shows how the resolution of supply-chain bottlenecks that were exacerbated by hot consumer demand and product shortages during COVID-19 lockdowns is still leading to forecasting errors and complicating ordering decisions by consumer goods companies.

‘Not smooth sailing’

Mr Beacham also said a large amount of new shipping capacity is set to come into the industry from late in 2023 until 2025 as new vessels arrive, which is the equivalent of adding 30 per cent of the current global shipping fleet. That is coming on stream at a time when demand is likely to fall.

He said the costs of shipping and bringing in goods to Australia from offshore have dropped significantly compared with a year ago, but there are still disruptions in supply chains.

“It’s not smooth sailing yet,” he told the summit. He said reliability levels are still below 50 per cent, and industrial relations issues in Australia have exacerbated the situation. “It’s still a fragile supply chain,” Mr Beacham said. But shipping container index tracking shows a 70 per cent reduction in price from November 2021 to November this year.

“It has fallen very quickly,” he said.

Race to the bottom

Jon Davies, the chief executive of the Australian Constructors Association, told a panel examining the issues of rising costs and inflation that construction companies have been undervalued in Australia for too long and a race to the bottom approach – where margins are pushed lower and lower when tendering – needs to stop. “We’re almost looked upon as a commodity,” Mr Davies told the summit.

Having to accept low-single digit profit margins on large projects with significant risks needs to “fundamentally change”, he said.

Rebecca Hanley, managing director of engineering and construction group Laing O’Rourke, said if there was a slowdown in the economy and some projects were put on hold, it would reduce a “hyper escalation” of projects that had built up and make the pipeline of projects more sustainable.

“The peak just keeps shifting to the right, because we never reached that peak,” Ms Hanley said.

Australian fashion jewellery chain Lovisa says it is ramping up its international expansion as sales continue to grow across its network.

In a trading update, the company said it had opened stores in new markets of Poland and Canada at the end of the last financial year, and new stores are set to open in Italy, Mexico and Hungary during the coming weeks.

The expansion comes on the back of strong sales during the first 19 weeks of the financial year. Global comp-store sales climbed 16.1 per cent as trading remained unaffected by government-mandated lockdowns. Total store sales grew 60 per cent compared to last year as network expansion boosted volume.

“We continue our focus on expanding our store network, with 47 net new stores opened for the year to date,” the company said in a statement.

After opening a net 47 new stores Lovisa’s network now stands at 676 across 26 countries.

Harvey Norman chairman Gerry Harvey is optimistic about retail spending into 2023, confident that the electronics and furniture retailer’s regional stores will power on despite fears of a slowdown.

The retailer showed further evidence on Thursday that Aussies are keeping up their spending on discretionary goods, revealing at its annual general meeting that there had been a 6.9 per cent jump in sales during the first four months of the 2023 financial year.

The company has also flagged a major expansion into the Malaysian market, with plans to grow there from 28 to 80 stores by 2028.

Harvey told this masthead that Malaysia’s population was bigger than Australia and its citizens were becoming increasingly affluent, meaning there was a big opportunity for the country to contribute significantly to Harvey Norman’s business in years to come.

“If you can get established in a country and be a number one retailer in that country in the products that we carry... then when that does happen, Malaysia in 10 or 20 years might be just as important as Australia,” the retail billionaire said.

Harvey said sales in the lead-up to the Black Friday special deals weekend and Christmas trading had been strong across the business.

“Everyone is out there advertising their head off [ahead of Black Friday]. The sales are very strong in our stores, and I expect they’re the same everywhere else,” he said.

While consumers could ease their spending in the new year, the impact might not be as strong as feared as regional town centres power on with strong employment and agricultural activity, he said.

“We are looking at it a bit optimistically because we have 65 percent of our stores in regional and country areas. Our country stores should be quite strong all next year.”

Investors didn’t seem to share his optimism, with Harvey Norman’s shares closed down 1.4 per cent to $4.17.

Meanwhile, rival furniture retailer Nick Scali also had good news to report, telling shareholders at its annual general meeting sales for the financial year to date were 74 per cent stronger than during the same time last year.

Shares in the company jumped 10.7 per cent trade at $10.34 in early afternoon.

E-commerce retailer Kogan was up 9 per cent at $3.74, with the stock advancing even though CEO Ruslan Kogan said at its annual general meeting that sales for the first four months of the financial year had dropped by 38.2 per cent during a period of “subdued sales activity in ecommerce”.

Despite this, he said the business would be able to return to its growth trajectory after it completed its sell-through of excessive inventory that it has been working through since it overestimated customer demand after COVID restrictions lifted earlier this year.

“We look to the second half of [the financial year] with confidence as the Kogan Group returns to being an agile, inventory-light business with strong operating margins,” he said.

Computers, technology, electronics and toys have been big sellers in the Black Friday to Cyber Monday sales, which are shaping up to break records as shoppers bring forward pre-Christmas spending to avoid future price rises and problems with supply chain disruptions.

Gerry Harvey, the executive chairman of retail chain Harvey Norman, said on Sunday that the Black Friday sales at the electronics, bedding and furniture chain set a record and the momentum continued over the weekend.

“All the bargain hunters are out there. The biggest sales are in computers and electronics. There’s still a lot of money out in the community and people are looking to buy now instead of waiting,” Mr Harvey said.

He suspected that shoppers spent more vigorously in the Black Friday period – which Harvey Norman labelled “Big Friday” in its marketing – than any other time in the retail calendar, including the traditional Boxing Day sales.

Mark Mezrani, founder and chief executive of educational toys chain Kidstuff, which has a network of 56 outlets, said business had been brisk over Black Friday and the weekend.

Kidstuff had a 30 per cent off sale and it had been very busy.

“Our Black Friday sales are very strong,” he said. “So far, so good, touch wood. It’s been very strong.”

He said it was a balancing act to try to maximise sales when the demand was there across the Black Friday period, which was now a huge event in the minds of shoppers. But some margin was sacrificed.

The consumer mind shift had been so significant over the past few years, it was a must for a serious retailer to be involved otherwise shoppers would go to rivals.

“This is an event that didn’t exist five years ago,” Mr Mezrani said. “There’s no doubt it’s the four biggest days of the year.”

Mr Mezrani said the two biggest selling items over the past few days had been a Squishmallow soft toy range, and a variety of different wooden toys as shoppers tried to shift away from plastic.

“There really is a big move to wooden toys, using recycled wood,” he said.

Carefully planned purchases

Paul Zahra, the former boss of department store group David Jones and now chief executive of the Australian Retailers Association, said shoppers were getting in quickly before future price rises, or supply chain disruptions caused stock availability issues.

“There’s no doubt that Black Friday has been fully adopted by retailers and consumers,” he said.

He said shoppers had carefully planned purchases before the sales event.

It was difficult to quantify how much had been pulled forward from the weeks leading up to Christmas.

“Some of it has been brought forward,” he said.

The ARA forecast that about $6 billion would be spent over the four days and records were likely to be set. “There’s still a day to go, but that’s what we’re seeing,” Mr Zahra said.

Some unique consumer psychology has also been at play. Many people want to spend up before Christmas gatherings, where they will finally be with family and friends in an unrestricted way after a very difficult time at the height of the COVID-19 pandemic.

“This is the first Christmas in three years when people are going to be able to fully get together and not have to do Zoom calls and things like that,” Mr Zahra said.

Although there were projections of economic gloom by many forecasters for 2023 as cost-of-living pressures bite and interest rates rise, they weren’t perturbed for now.

“They’re saying life’s too short,” Mr Zahra said, shrugging off any future rate rise pain.

“People aren’t worried about that just yet."

Foodland Supermarkets is set to open a unique “community-minded” liquor chain in South Australia early next month.

Dubbed ‘Local Cellars’ – the stores will sell local wines, craft beers and spirits depending on the region or location – while providing customers with what Foodland describes as “a premium shopping experience”.

Foodland Supermarkets CEO, Franklin dos Santos, said launching the liquor chain was the “next step” in the retailer’s growth pipeline.

“South Australia has some of the best wines, beers and spirits in the world and we want to encourage local producers in the community to prosper.

“The benefit of this approach is that we’re creating less emphasis on the need for transport which will minimise our impact on the environment.”

The first Local Cellars store will open in Renmark with more than 10 planned across the state before March next year.

In addition to local alcohol, the stores will also stock other South Australian complementary beverage brands and mixers. The stores will operate either next to a Foodland supermarket or as a stand-alone separate family business.

In November 2020, the retailer invested $300 million into a five-year plan to refurbish and add new stores in South Australia.

As the South African owners seek to progress a sale of David Jones, its full year 2022 accounts show that sales slipped slightly, and net profits were crushed by more than fivefold.

The latest filing to the corporate regulator by Osiris Holdings, the local vehicle that holds the department store, showed that sales for the 52 weeks ended June 25 reached $2.06 billion from $2.11 billion the year prior. That includes merchandise sales and concession commissions.

Profits after tax fell to just $14.53 million for the year from $84.26 million in 2021.

Profits from its share of its credit card alliance fell in 2022, and the retailer did not have the significant boost from the sale of property it achieved in 2021. Woolworths repatriated $90 million in special dividends in March.

Charter Hall snapped up the prized 12-storey Elizabeth Street flagship for $510 million in 2021. It also sold its Market Street store and its menswear site in Melbourne. David Jones still owns Melbourne’s Bourke Street store, which is mid-refurbishment.

David Jones chief executive Scott Fyfe said despite the 2.6 per cent fall in sales, it was a “tale of two halves” in 2022, and David Jones was now a profitable and self-funding business.

“It is a strong result, attributable to our continued focus on delivering on the Vision 2025 strategy, which includes space optimisation and cost-out initiatives, the rationalisation of the DJs food offering and, a focus on trade and omnichannel,” said the Scot driving the turnaround.

He added that David Jones was in a strong position to maximise profitability in the years ahead and be a leader in omnichannel retail.

Woolworths flagged early this month that sales increased by more than 55 per cent in the first 20 weeks of the new  year, with its flagship and CBD locations performing well ahead of expectations.

Trade was seriously hampered a year ago by extended lockdowns, resulting in relatively higher growth rates in the current period.

The ultimate parent of Osiris Holdings is Woolworths, which is listed in Johannesburg and is working with Goldman Sachs to explore a sale of the 184-year-old department store.

It is believed that Woolworths wants a deal by early next year. Any buyer would want to see pending Christmas trading.

The Australian Financial Review’s Street Talk revealed that Teoh Capital – the private investment firm of billionaire David Teoh and his family – joined the auction for the nation’s oldest department store chain which could spell the end of a rather painful era for its offshore owners.

Phil Cave’s Anchorage Capital Partners is also in talks with the seller and its bankers. It is believed to have lined up $150 million in working capital and $50 million in guarantees to help fund its likely bid.

Retail sales at Westfield malls have bounced higher, by an inflation-beating 15.6 per cent in the September quarter on their pre-pandemic levels, as cashed-up shoppers are confident enough to keep on spending.

The third quarter trading update from ASX-listed Scentre, the owner and manager of 42 Westfield malls around the country, is the first from its new chief executive, former chief financial officer Elliott Rusanow, who said the surge in sales figures augurs well for festive season trading.

Specialty sales picked up 12.9 per cent in the first three quarters of the year, compared with 2019, indicating retailers’ trading results have accelerated in the last quarter alone. All that activity at the till comes as customer visits surged, up 16.7 per cent to 391 million so far this year, compared with a year earlier.

Mr Rusanow expects individual visits across the malls portfolio to hit 500 million by the end of the year, promising a strong fourth quarter for the Westfield portfolio.

“This is going to be the first festive season in three years where people won’t have restrictions placed on them,” he told The Australian Financial Review.

The lift was less a case of “revenge shopping” and more the result of a “structural improvement” in what Westfield customers were doing with their time and money after two years of rolling lockdowns, he said.

And if freedom from restrictions is what is pulling more shoppers into its malls, then the push, according to Mr Rusanow, is the fact that other discretionary spending options such as travel are now relatively more expensive.

“We compete very well in that competition for the time and attention of people because we in effect offer free entertainment as well as a place to go to around the festive season,” he said.

“The level of savings that has been accumulated over that two-year period over 2020 and 2021 is a very large amount of money. It’s not all being redeployed back into other things that they might have traditionally been spending on. The consumer is in a very healthy position.”

That level of spending has flowed through the financial health of Scentre’s tenants. The shopping centre owner has collected $1.92 billion in rent this year, an increase in $235 million over the comparable period last year. The rent collection tally represents more than 100 per cent of billings, a sign Scentre is catching up on rent owed.

While the strong sales figures themselves incorporate some impact from inflating prices, Mr Rusanow is confident that consumers will keep up their level of spending in Westfield even as living costs rise.

“They are concerned about the rising cost of living but the impact of that on our business is less than what it might be on other forms of spending,” he said.

Scentre’s leases are set up to include CPI-linked increments, giving the landlord a buffer against inflation, but also putting pressure on its retailers to maintain their sales growth sufficiently to support their rents.

Scentre does not update its re-leasing spreads – a key metric showing the difference between old and new leases – at the third quarter, but Mr Rusanow said they were continuing to improve.

Scentre has reconfirmed its earnings guidance for a 14.2 per cent growth in funds from from operations to 19¢ per security for 2022, with distributions of at least 15¢, up 5.3 per cent.

“Scentre’s guidance looks conservative on the back of today’s positive metrics,” Morgan Stanley analysts wrote.

Amazon.com is the world’s first public company to lose a trillion dollars in market value as a combination of rising inflation, tightening monetary policies and disappointing earnings updates triggered a historic selloff in the stock this year.

Shares in the e-commerce and cloud company fell 4.3 per cent on Wednesday, pushing its market value to about $US879 billion ($1.37 trillion) from a record close at $US1.88 trillion on July 2021. Amazon and Microsoft were neck-and-neck in the race to breach the unwelcome milestone, with the Windows software maker close behind after having lost $US889 billion from a November 2021 peak.

While technology and growth stocks have been punished throughout the year, fears of a recession have further dampened sentiment in the sector. The top five US technology companies by revenue have seen nearly $US4 trillion in market value evaporate this year.

The world’s largest online retailer has spent this year adjusting to a sharp slowdown in e-commerce growth as shoppers resumed pre-pandemic habits. Its shares have fallen almost 50 per cent amid slowing sales, soaring costs and a jump in interest rates.

Since the start of the year, co-founder Jeff Bezos has seen his fortune dwindle by about $US83 billion to $US109 billion, according to data compiled by Bloomberg.

Last month, Amazon projected the slowest revenue growth for a Christmas quarter in the company’s history as shoppers reduce their spending in the face of economic uncertainty.

That sent its market value below $US1 trillion for the first time since the pandemic-fuelled rally in tech stocks more than two years ago.