For generations of Australians, a trip to David Jones was an occasion in itself.
It was where families went to find the perfect Christmas gift, couples picked out presents for their wedding registry and shoppers indulged in a little everyday luxury.
But the future of the 188-year-old department store is now hanging in the balance, with its collapse into voluntary admisistration sending shockwaves through the retail industry little more than a month before Christmas.
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While administrators work to determine whether the iconic retailer can be resuced, thousands of customers, employees and suppliers are facing an anxious wait over what comes next.
Compare The Market economic director David Koch said the fallout could be significant, with everything from gift cards to jobs in question.
The financial troubles behind the collapse The retailer was placed into voluntary administration this week after crisis talks with key landlord Scentre Group, the owner of Westfield, broke down.
Scentre Group confirmed David Jones had not paid rent since September, with the retailer’s financial troubles deepening as negotiations over its future reached a stalemate.
The administration process will give the business some breathing space while administrators assess its financial position and whether it can be restructured or sold.
David Jones has entered voluntary administration, putting thousands of jobs, and 36 stores, at risk. Credit: AAP Be the first to know:
What happens to David Jones gift cards and wedding registries? For shoppers who have been holding onto David Jones gift cards, or planning to spend them on Christmas presents, the news may not be good.
Koch warned customers with outstanding gift cards could effectively become creditors of the business, meaning they may have to wait to find out whether they will ever recover the value of their cards.
“You can’t use your gift card. You need to wait for the administrator to say, ‘OK, you’ve got a $100 gift card. We might convert that into $5’,” he told The Morning Show on Friday.
The uncertainty also extends to couples who have chosen David Jones for their wedding registries.
With guests potentially having already paid for gifts that have not yet been delivered, there are questions over whether those purchases will be fulfilled or whether couples and their guests could be left out of pocket.
While some customers may ultimately recover their money, he warned the outcome would depend on how much money was available to repay creditors.
“It depends on next Friday’s creditor report. If things look great and everyone gets paid out and there’s enough money to pay everyone out, well, then you’re fine,” he said.
“If there’s not, then administrators might be saying, well, your guest who may have spent $100 on a wedding present may get $2 back or $5 back or $10.”
For those hoping to get in quickly and spend their gift cards before restrictions take effect, Koch suggested there may be little opportunity.
“I doubt they will,” he said.
He said administrators could legally put a stop to gift cards because accepting them would mean money leaving the business during the administration process.
Suppliers scramble to protect their stock Images of stock being pulled from shelves have gone viral since the retailer’s collapse.
Koch said there was an important reason behind the scramble, with much of the merchandise inside David Jones not actually owned by the department store.
He explained brands, including Sportscraft and Country Road, operate their own concessions within David Jones, effectively renting space to sell their products.
Images of stock being pulled from shelves have gone viral since the retailer’s collapse. Credit: The Morning Show That means suppliers face the risk of losing significant sums if their stock is sold and the proceeds are absorbed into the administration.
“The great fear of those companies is if any of my stock gets sold, the money’s not going to come to me. It’s going to go into the administration,” he said.
“That pair of jeans that someone has, Sportscraft may only get 20 cents in the dollar back for it.
“That’s why there was the big scramble to get the stock, because the stock isn’t actually David Jones’ stock.
“They don’t want to get caught in the middle of this administration.”
The loss of supplier confidence could also prove an obstacle to any rescue attempt.
Even if administrators manage to find a buyer or develop a plan to keep parts of the business operating, convincing brands to return their stock could be a major challenge.
Koch said rebuilding that trust would be critical to the retailer’s future.
What happens to David Jones staff and Christmas casuals? With the busiest shopping period of the year approaching, thousands of employees are also facing an uncertain future.
David Jones operates 38 stores across Australia and New Zealand and is believed to employ more than 5000 people.
Koch said staff entitlements would be high on the priority list for administrators, but warned a significant restructure could mean widespread job losses.
But he said the prospect of closing a large number of stores would inevitably put jobs at risk.
“If you’re going to get rid of half the stores, then it’s logical that half the staff will go,” he said.
For Christmas casuals and other workers relying on the department store’s busiest trading period, the uncertainty comes at an especially difficult time.
Cost-of-living pressures hit retailers Koch pointed to broader economic pressures weighing on Australian retailers, arguing households are increasingly being forced to pull back on discretionary spending.
“This is a consequence of five straight interest rate increases. This is a consequence of the average Australian paying $6500 more per year on their mortgage compared with this time last year,” he said.
“They’ve got to tighten their belt and they tighten their belt by not going to the shops as much.”
He said the collapse was part of a wider pattern of businesses cutting costs as consumers spend less, with staff often bearing the brunt of those decisions.