DJs ready to show off result of $250m spending spree

A LITTLE more than 10 months before the annihilation of Lehman Brothers cast an ominous shadow over the world's economies, the board of David Jones signed off on an unprecedented $250 million refurbishment plan to create Australia's pre-eminent department store in Melbourne.

As the leviathans of Wall Street tumbled and consumer confidence plunged, David Jones was busy knocking down walls, installing lift shafts and spending piles of cash on fittings and fixtures typical of Harrods or Bloomingdale's. In two days, David Jones will see if that big bet has paid off when the upmarket retailer lifts the veil from its flagship Bourke Street Mall store and invites the public to inspect thousands of premier fashion brands, many in Australia for the first time.

Holding court for a week of special events that will culminate in tomorrow night's 300-guest red-carpet gala in the refurbished store will be David Jones's newly appointed chief executive, Paul Zahra. While it was previous CEO Mark McInnes who sold the massive redevelopment plans to the board and investors, it will be his long-time colleague and replacement who will have the honour of cutting the ribbon.

Only seven weeks into the job, Zahra is battling to draw attention from the unfortunate headlines created by the shock departure of McInnes over allegations of sexual misconduct.

It is both the best of times and the worst of times for David Jones, and this week's store opening is the board's first and best opportunity to refresh its image.

"This new building for us will redefine the shopping area in Melbourne," says Zahra. "You will have the two big department stores facing the Bourke Street Mall and it will redefine the heart of Melbourne."

The other store he is referring to is neighbour and arch rival Myer, which is in the midst of its own redevelopment plans for its Bourke Street edifice. Their intense rivalry has seen them chase the best and most advanced department store designs in the world, in the process thrusting Melbourne on to the world stage as a leading fashion capital.

For inspiration, David Jones has modelled its flagship store on London's Selfridges and the iconic Bloomingdale's store on 59th Street in New York.

"We have done a lot of research about international department store trends and we see ourselves as having the best national and international brands," Zahra says.

The scope and number of brands on offer should be enough to make any battle-hardened fashionista swoon.

David Jones's flagship Melbourne store will have 2500 brands, of which 1600 will be exclusive to the store, and 150 on sale in Australia for the first time. To showcase properly all the fashion, men's and women's, David Jones has folded operations across seven sites and three buildings into two, while using stunning architecture and interior design to increase total floor space by more than 30 per cent.

Much of that extra room will be taken up by women's fashion, which will have 88 per cent more space.

"We will also deliver what we believe will be the best branded service experience in the heart of Melbourne," Zahra says.

Zahra and David Jones have long realised that a key to the store's success would be treating the designers and the world's most celebrated fashion houses with the respect and attention they demand and this has been done by allowing the creators of the clothes to also create the space from which the product will be sold.

"We allow brands to present themselves as they would in the international arena: whilst the floor and the ceiling are us, the brands actually represent themselves as they see themselves," he says.

A walk through David Jones gives the impression of shops within a shop, each designer allocated its own hub that makes it distinct while keeping some of the commonality of the floor around them.

It will also have the only food hall in a department store in Melbourne (Myer will have cafes at its redesigned flagship store), based on the food space in Harrods.

The Melbourne-born Zahra got his start 28 years ago with Target and has been at David Jones for 12 years, building a retail career on strategy and its execution. He has been intimately involved in the logistics of the Bourke Street refurbishment, making sure the $100 million spent on the construction and fitout was wisely spent. Another $150 million was spent on buying the required land and buildings.

"All through the global financial crisis, the board, management and staff kept focus on the goals of the construction and what they were trying to create for Melbourne," he says.

"We are primed now to leverage the upcycle when that comes and, with the 30 per cent increase in floor space, we expect sales and earnings before interest and tax will grow by that as well.

"It's a massive investment that we will know we will get a return on."

When the refurbishment and construction plan was announced to the market in November 2007, David Jones estimated the market opportunity of the development to be more than $300 million in sales over time.

Zahra is cautiously optimistic for the coming Christmas trading period and draws confidence from the fact that the new store in the CBD will be fully open for the first time as shoppers look for Christmas presents.

David Jones forecasts a worst-case scenario of flat sales growth for summer but has cut its costs back accordingly, meaning any improvement in trading conditions and consumer confidence will feed straight through to the bottom line.

"The fact is that people, even during tough times, look for value. And it's not about the price point, it's about the brand that they have confidence in and aspirational elements of those brands and those people with cash are still around."