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David Jones to get with the private label program

It’s not the setting you would expect Australia’s ritziest department store to change ownership, but at a dreary courtroom in Sydney yesterday that’s exactly what happened when Woolworths won approval for its takeover of the 176 year old David Jones.

No doubt the champagne corks will be popping at Woolworths’ South African headquarters after a last minute intervention by the corporate regulator almost ruined the deal and rag-trade billionaire Solomon Lew almost did likewise before being wooed by a thumping takeover premium for his minority stake in Country Road.

For Woolworths and its Scottish-born former rugby player boss Ian Moir the real work actually starts now as his own investors keep a very close eye on his promises to add more than $130 million to David Jones bottom line at a time when department stores and discretionary retailers in Australia are buckling under intense price competition and anaemic growth.

Mr Moir, who has been circling David Jones for years, has his game plan which will include stripping out underperforming brands from the department store’s floors and replacing it with his own private label offering sourced via Woolworths’ strong portfolio of in-house brands and labels owned by Country Road.

This might well require a period of adjustment for rusted on David Jones shoppers who could soon discover their favourite labels are no longer available, although it would be profit suicide if the exclusive European brands were also taken out and these are expected to maintain their pride of place in the store.

But there will be plenty more private label brands filling the space between the exclusive ranges. Its estimated David Jones’ private label contribution is at around 3.5 per cent against an international benchmark of 20 per cent. However, much of that private label slice is not viewed as ‘true private label’ because it is sourced through third parties which reflects David Jones buying culture and is a key contributor to slimmer margins.

Australian shoppers will soon be exposed to Woolworths own private label range which includes brands such as JT One, Studio and Re as well as an expanded Country Road offering of Witchery and Mimco.

Mr Moir has also backed the idea of more staff on the floor and a better targeted loyalty scheme to increase transaction value and frequency of visits by its customer base.

It all points to a hungrier, leaner and smarter David Jones. Whether shoppers will follow the South African’s lead remains to be seen, or if David Jones can straddle the two worlds of being both an upmarket, exclusive house of brands as well as a clearing house for private label clothing.