DJs aiming higher with smaller stores
Upmarket department store David Jones will undertake an extensive review of its property portfolio as it heads into a period of lease expiries and store redevelopments into smaller formats.
The search is also on for new sites in neighbourhood strips across the country, of about 7000 square metres, based on the village format store in Malvern.
It is one of the most thorough reviews being planned by the department store owner in many years, because in the past the leases were automatically rolled over, despite the performance of the store.
But in the next five years there are six stores where the leases will expire and it is expected the retailer will exit and use the opportunity to take up smaller spaces in locations better suited to its prestige demograhics.
Traditionally landlords start negotiating commercial leases at least a year before they expire. But if the tenant is exiting, the owner needs notice to plan for any redevelopment to minimise downtime between leases.
Outgoing chief executive Paul Zahra said at the recent results that the current portfolio consisted of 38 stores, of which six leases, in "less robust demographies", were due to expire in the next five years and another three stores would open by 2016 "in attractive demographies".
Suburbs such as Mosman in Sydney and Toorak in Melbourne will be targeted for smaller, village-style stores, if space of about 7000 square metres can be found.
"These lease expiries give us the opportunity to review our store portfolio in light of our broader omni-channel retail strategy," Mr Zahra said.
He said the focus was to develop the smaller, village format like the new store at Malvern, where gross lettable area generated 85 per cent of sales, (in a smaller space) than the current 75 per cent. "In the 2010 financial year, about 73 per cent of our gross lettable area was 'selling space'. We have increased this to a current average of 76 per cent and are working towards improving this to 85 per cent of selling space in our new stores and 80 per cent in our refurbished stores."
He said the smaller format store was a concept David Jones has said it will roll out further. "Success at Malvern will be an important precursor to further openings," he said.