Kirkcaldie & Stains is 152 years old. It announced this afternoon that it will be replaced by David Jones’ first New Zealand outlet by mid-2016. Kirkcaldies will trade under its existing name until late January next year before reopening as a David Jones store in the middle of 2016.
David Jones has expressed the intention to offer employment to the majority of Kirkcaldie & Stains staff.
The David Jones brand is based in Australia, but it is owned by Woolworths South Africa. It had formerly been listed on the Australian stock market, but was taken back into private ownership last year after selling for A$2.2 billion.
Kirkcaldie & Stains has recently been struggling to maintain profitability. In its most recent financial report, it posted an after-tax loss of $501,000 in the six months ended February 28.
Last year’s profit ending February 28 wasn’t sizeable, as it made $563,000.
It reported a net loss of $6.5 million in August and had to sell its Harbour City Centre building for $45.85 million to pay off various write-downs, as well as $23.5 million in bank debt.
John Milford, Kirkcaldie & Stains’ CEO of eight years, resigned in December. Former managing director Philip Shewell stepped up as acting CEO.
Kirkcaldie & Staines chairman Falcon Clouston says the current retail environment has changed radically over the past decade, and Kirkcaldie & Stains has sustained trading losses from its retail operation for the last seven years.
“As a single large format store we lack the buying power and scale needed to compete with multi store regional and global operators,” Clouston says. “Those operators have the ability to create their own brands, extract competitive pricing from suppliers, and establish platforms for on-line offerings which a single store such as Kirkcaldies simply cannot cost effectively do.
“This has been reflected in the retail operations struggling to make money for several years. While we received substantial funds from the sale of the Harbour City Centre, the board did not see how investing those proceeds in the retail business could be justified when we are faced with the much greater competing pressures from multi-store operators.”
Under the transaction, David Jones will take over the Lambton Quay main store lease and will pay around $433,000 cash for the name Kirkcaldie & Stains. The company will also have the option to acquire the fixed assets of the retail business for a further $500,000.
Stock is not included in the sale, and on May 31 was valued at approximately $8.3 million before provisions.
The transaction will take place on February 1 next year. It requires shareholder approval at a meeting expected by the end of July, plus consent from the landlord of the Lambton Quay store, a satisfactory seismic assessment report and approval from the Overseas Investment Office.
Retail NZ welcome the news. Chief executive Mark Johnston says having a company like David Jones investing in the New Zealand retail market is a “vote of confidence”.
“Retail in New Zealand is already highly competitive, and the arrival of David Jones will offer more choice for shoppers,” he says. “While the Kirkcaldie & Stains brand will disappear from Wellington after a long history, there is a real upside in that the capital will continue to have a major department store. Shoppers are likely to benefit from new brands and new products, underpinned by the economies of scale that a major Australian store can bring”.
When the financial report was issued in April, Kirkcaldies’ shares were trading at around $1.70, but within an hour of the takeover announcement, its shares had jumped nearly 28 percent to $2.15.