I believe in fairy tales. They are the basis of all our performance of storytelling and film making, when we twist the real events of the world into something that offers us hope and I believe in that – Charles Sturridge

Everyone sitting down, comfortable, relaxed? Are we ready to start?

Now this week, I am going to share with you a fairy tale.

Once upon a time, a leading Australian department store sold for well over its market value to a very friendly South African retail conglomerate in a non-allied sector, incurring a huge debt, nothing changed and they all lived happily after all. This is the story of the David Jones take over.

So readers, how will Woolworths’ board deal with that nasty big debt it has incurred in spending $2.2 billion on David Jones?

How will they reduce the debt, grow sales, increase margin, keep the positioning of David Jones’ 176 year heritage , make a profit, keep everyone on the team motivated, while delighting a growing customer base?

These are part of a series of extraordinary topics confronting the new ownership of David Jones and they will require changes to the very core of the David Jones business mode – its traditional heritage, which many of us have grown up with; and the customer experience that has come to be expected at David Jones.

I was curious, although not overly surprised, at the overwhelming support shareholders gave the takeover, when many issues such as debt reduction will mean structural changes to the David Jones model.

Now that the sale is complete, we see that an internal team of Woolworths’ top retail executives have formed a SWOT team to deliver options that address these topics.

Cleaning the balance sheet of the new owners will clearly be a short term priority.

Not much will be sacred I suspect and certainly the retail group will consider selling down some of the asset portfolio of David Jones, most likely one of the Sydney CBD stores (probably the Market and Castlereagh Streets store) and selling the recently granted air rights above the store (think massive inner city residential block).

If this example occurrs, we would see 18 floors of flagship retail from the two CBD buildings consolidated into eight floors at the Elizabeth St store.

As we know, economic productivity and customer experience can often have an inverse relationship and this may well make the point.

Would that be the end of that David Jones experience and heritage, including the demise of the food hall, a tourist destination in its own way, that has been likened to Harrods in Knightsbridge?

Would the grand ballroom of the seventh floor, synonymous with elegance and prestige and clear attributes of the David Jones brand persona, be converted into retail space?

Could you then buy your electrical appliances at the very spot where Queen Elizabeth greeted an audience? Oh, and who needs a head office when that space is at least $8,000 per sqm?

And so, the list of possibilities goes on and that list would have been very clearly factored into the price paid.

I would have thought that the heritage of David Jones held some key to its future, and I am not against advocating change, however, if the view is that the new owners will achieve all the goals in harmony, then we really are reading a fairy tale.

Happy Fit Retailing

First published by Inside Retail August 2014