This article is from the Australian Property Journal archive
UPMARKET retailer Davis Jones has done a runner for the second time this week.
Yesterday, David Jones announced the closure of a non performing store at Centro’s Bankstown shopping centre in Sydney’s western suburb.
David Jones will not be renewing its lease in Centro’s Bankstown centre at the end of July 2007. The retailer had flagged the possibility of closing down the Bankstown department store earlier this month, after opening a new store at Westfield Burwood.
David Jones’ lease at Bankstown expired in September 2006 and has since operated in Centro’s Bankstown centre on a month-to-month lease.
Chief executive Mark McInnes said the David Jones Bankstown store has always been a marginal store in the retailer’s portfolio.
“We have publicly stated that it generates approximately $1 million in store contribution (pre allocation of Head Office charges) and that unless we could agree lease terms with the landlord that significantly improve our store profitability, we would exit the centre and focus our resources on high growth, high value stores in our portfolio, such as our new Burwood store,” he added.
McInnes said David Jones would have remained in Bankstown if it could significantly improve profitability.
David Jones currently occupies three floors totalling 14,566 sqm at Bankstown and is also the only upmarket department store at the 82,289 sqm centre.
Centro was unable for comment yesterday, so it remains unknown whether a replacement tenant has been found.
This decision follows another closure announced by David Jones earlier this week that it will not to renew a 10,000 sqm lease at the Terrace Tower Group’s Westfield Eastgardens Centre in Sydney’s eastern suburb of Pagewood.
Terrace Tower Group is believed to have negotiated Myer to takeover the space at Eastgardens.
Meanwhile, McInnes said since opening at the Burwood store on May 03, performance has been outstanding.
“We are confident that the store contribution from Burwood in its first year of operation will be significantly higher than the combined contribution from Eastgardens and Bankstown.
“Focusing on high growth and high value stores rather than committing significant company resources to marginal stores with long term lease risk will deliver better short, medium and long term returns for our shareholders,” he added.
David Jones began implementing its strategy to limit long term lease risk in December 2005, when the retailer paid $414 million to unwind the sale and leaseback of its flagship Sydney and Melbourne CBD store properties from the Deutsche Retail Infrastructure Trust.
The retailer paid $362 million in cash and $45 million to unwind the 79-year sale and leaseback structure it had entered in December 2000. The properties were sold to Deutsche Retail Infrastructure Trust on a sale and leaseback structure for $366 million.
Australian Property Journal