Woolies deal promises jobs

2014-04-09 13:28

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More jobs could be created if a deal by retail giant Woolworths to acquire Australian fashion chain David Jones goes through, said group CEO of Woolworths Ian Moir today.

Woolworths announced this morning that it had offered David Jones about R21 billion to buy the company in an effort to boost its offering.

David Jones is one of Australia’s oldest and most prominent department stores. It operates 38 department stores on the continent and owns its flagship stores in Sydney and Melbourne.

Moir, in a conference call with journalists this morning, said Woolworths was particularly interested in the private label inside David Jones and not necessarily the other international brands, which would not be offered at first.

“David Jones has a tiny private label, which is way below international standards for department stores,” said Moir. He said margins from the private label division at David Jones were only 3%, but the international standard for department stores was 30%. By growing this portion it would translate into more local jobs.

“There will be more jobs because there will be more products that will go from South Africa and the Southern African Development Community region to flow into Australia to build the private label part of the business,” said Moir.

Moir said the acquisition will also help drive growth of profit margins at Woolworths and said the acquisition of David Jones was the “next natural step”.

One of the main reasons Moir says David Jones was chosen was because of the synergy in seasons – both South Africa and Australia are in the Southern Hemisphere.

Moir said this would mean that product could be turned around much faster.

Woolworths is also hoping to leverage David Jones’ online presence and grow that part of the business through the acquisition.

“And because we will be more fashionable and on-trend, that will lead to better prices and we use that to be more competitive,” said Moir.

The funding of the deal will come from a combination of debt and cash and Woolworths will issue more shares after the transaction has concluded to raise more cash.

Shareholders still have to vote on the deal before it can go through.

“We will play on a bigger stage and it will be good for South Africa,” said Moir.

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