Department store group, David Jones has pulled out of a major shopping centre in the second decision of its kind in the past couple of weeks.
The retailer said yesterday it had terminated a lease in Brisbane’s Toombul Centre to concentrate on a more profitable store nearby.
The move follows the decision to terminate a lease on a proposed store in the suburban Melbourne mall at Fountain Gate. Myer is taking up the space.
The decisions gives us some idea of the thinking of new CEO, Paul Zahra, who took over when Mark McInnes controversially quit under a cloud in June.
There is clearly a move to limit the ambitious expansion of Mr McInnes by narrowing his list of new stores and store expansions to where the retailer sees profitable returns, not marginal results.
It’s not the first time this has been done.
In 2006-07 the retailer under Mr McInnes, David Jones pulled out of Centro’s Bankstown square in Sydney’s southwest (and moved into Burwood Westfield, in the inner west) and also quit Westfield’s Pagewood in Sydney’s east over a dispute about rent. It has a big store in the huge Westfield Bondi Junction centre about 10 kms away.
David Jones also currently is negotiating to move into the Highpoint shopping centre at Maribyrnong in Melbourne’s west which is being expanded at a cost of $300 million by owners GPT by 2012.
This was a project of Mr McInnes, so it will be interesting to see if it is sustained.
Last week David Jones revealed an agreement to expand its Karrinyup store in Perth’s fast-growing northern suburbs, from the current small 9,500 square metres to 13,000 and possibly 14,000, which would make it a full-size department store.
This store is currently underperforming and competes against a full-size Myer in the same centre.
David Jones says the new lease will improve the store’s performance, lifting the range of goods to be offered to customers and making higher margins.
But judging from yesterday’s statement, expansion at Toombul was never an option.
David Jones said that it had agreed with Centro to an early termination of its existing Toombul lease.
It will instead focus its efforts on its larger and more profitable Chermside store in the Westfield Shopping Centre, five kilometres from Toombul Centre and in Brisbane’s northern suburbs.
The Toombul lease was due to expire on October 17, 2012, but David Jones will now exit the lease in February of next year.
Mr Zahra said this decision was consistent with the company’s strategy to focus on high value, high growth stores.
"The profits that would have been generated from our Toombul store will be captured as we transfer David Jones customers to our Chermside store," he said in the statement yesterday.
"This can be achieved at a vastly reduced cost in comparison to remaining at the Toombul site.
"Our Chermside store generates more than double the sales of our Toombul store and has the scope to grow further."
The company says it’s committed to providing continued employment to all current Toombul staff within David Jones.
The existing David Jones space in the Toombul Centre will be taken over by discount department store Target.
The company confirmed its commitment to provide continued employment to all of the current Toombul staff within David Jones.
David Jones shares rose 2c to $4.57.
