South African retailer Woolworths is accelerating the transformation of its Australian retail businesses, lifting the profile of Country Road while shaking up executive ranks at David Jones.
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Two months after completing a $2.1 billion takeover, Woolworths has made its first noticeable change to David Jones' offer by heavily promoting Country Road clothing and homewares.
Windows in David Jones' flagship Sydney store, which normally feature international and domestic designer brands, are swathed in Country Road this week, coinciding with the brand's 40th birthday celebrations.
Country Road and sister brands Witchery and Mimco are now wholly owned by Woolworths after the retailer completed a $213 million takeover last month, ending a 17-year stand-off with 11.8 per cent shareholder Solomon Lew.
Expanding the Country Road, Witchery and Mimco ranges in David Jones is a key component of Woolworths chief executive Ian Moir's plan to lift earnings at David Jones by $130 million over the next five years.
Mr Moir has forecast $30 million to $40 million in incremental earnings from growing the Country Road brands and another $70 million to $80 million from increasing private label brands from 4 per cent of sales to 20 per cent.
According to David Jones' 2014 accounts, sales rose 2.4 per cent to $1.89 billion in the 12 months ending July, but net profit fell 21.2 per cent to $75 million – in line with a 22.6 per cent fall in profits at rival Myer.
Woolworths has also put the broom through David Jones' executive ranks amid mounting speculation it plans to sell and lease back its four CBD stores.
David Jones chief financial officer Brad Soller will step down this month, following other executives who have departed since Woolworths took control in August. These include head of strategic planning Matthew Durbin and general counsel Susan Leppinus.
Other senior executives have been promoted, including retail services head Tony Karp, who is now head of group transformation for Woolworths and is responsible for driving integration and transformation opportunities across the business.
Mr Soller was opposed to the sale and leaseback of the four CBD properties and his departure – by mutual agreement – clears the way for Woolworths to explore offers from local and international superannuation funds and real-estate investment trusts.
JP Morgan analyst Stephen Carrott believes Woolworths has a "firm intention" to sell and lease back the four stores – two in Sydney and two in Melbourne – by early 2016. The stores are in the books at $612 million but could be worth $900 million, he says.
Mr Moir has previously said he will review the property portfolio when further information is received. "Our view on David Jones' property portfolio hasn't changed since we announced the acquisition of the business," a Woolworths spokesman said on Monday.
"This was a retail acquisition not a property acquisition so our first priority remains the business and ensuring it has the right systems and resources in place. We don't see property as the priority so no decisions have been made."
