Woolworths expanding down under

By on April 9, 2014

South African retailer Woolworths Holdings has acquired Australia’s second largest department store David Jones for a reported R21.4 billion to create a southern hemisphere retail powerhouse boasting pro-forma combined revenue of over R51 billion from 1 151 stores across 16 countries.

Woolworths beat the bid of Australian rival Myer Holdings by offering A$4 per share, which represented a 25 percent premium on the closing price of the share last night. The stock rose sharply to A$3.915 this morning after news of the purchase broke.

“We’re buying this business to build a bigger southern hemisphere brand,” Ian Moir, Woolworths Chief Executive Officer, said. “We’ve got real scale in the southern hemisphere, we’ve got the same seasonality, so we’ve got a real competitive advantage over northern hemisphere entrants.”

Strategic Opportunities

David Jones is an iconic Australian brand and occupies a similar customer positioning to Woolworths in South Africa at the premium end of the apparel business, with both businesses enjoying strong aspirational brand identities and a strong alignment of values.

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

WHL has operated successfully in Australia for over 15 years through its subsidiary, Country Road Group, which operates the Country Road, Trenery, Witchery and Mimco brands.

The combination of WHL and David Jones provides significant advantages that will benefit both companies and their customers through enhanced global sourcing and the ability to leverage shared seasonality and trends.

The deal will position Woolies as one of the top 10 global department store operators focussed on the southern hemisphere. Additionally, it will become one of the largest companies listed on the Johannesburg Stock Exchange (JSE).

Woolworths key initiatives down under:

  • Profitable expansion of the David Jones private label product offering
  • Overall group profitability improvement and better product pricing through increased volumes and group-wide lower cost sourcing
  • The introduction or expansion of the WHL brands within David Jones stores
  • Continuing to provide a strong platform for independent brands
  • The introduction of an improved loyalty programme based on existing WHL knowledge and expertise
  • Significantly increasing omni-channel initiatives and presence
  • Rolling out of village format stores and improving existing store productivity.

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