THE DISTILLERY: DJs' D-Day

A cacaphony of jotters target their pens against David Jones, while a couple look at a mild revolution within Vodafone.

The David Jones discussion has now moved on from comparisons with rival Myer and the lack of an internet presence to the performance of its chief executive and the survival of the company itself. In this morning’s edition of Distillery, The Australian’s John Durie, The Australian Financial Review’s Matthew Stevens and The Sydney Morning Herald’s Ian Verrender examine yesterday’s performance of chief executive Paul Zahra, who’s responsible for the company’s current predicament, and what the future is for the retailer. And, The Sydney Morning Herald’s Malcolm Maiden says DJs was just too late on the American Express news. This morning, there’s no other story like David Jones.

Firstly, The Australian’s John Durie gives a relatively scathing review of Zahra’s briefing yesterday, given that he inherited the company in tumultuous circumstances.

"If you were looking for either detail or new ideas from Zahra yesterday then you would have left disappointed and come home with doughnuts. After spending all of 10 minutes telling shareholders the company was losing sales at three times that of rival Myer and unveiling a massive profit downgrade, Zahra then went on to talk strategy for the next couple of hours. It's an old tactic, which was never going to win support – and it didn't yesterday as shown by the 11 per cent fall in the stock price to $2.43. Punters who had lost faith had already fled the stock and Zahra certainly gave them no reason to come back.”

The Australian Financial Review’s Matthew Stevens says Zahra is keen to contextualise the retailer’s current problems against a broader period in the company’s recent history.

"Stung by analysts’ commentary suggesting David Jones’ latest strategic map was another example of reactive thinking, Zahra yesterday reflected on the flaws of the now-retired 2009-2012 strategy and his rapid response to them since taking the top job. The last three-year plan essentially ignored the internet’s potential and had focused too firmly on cost management, he suggested. ‘We all agree today that we hurt our brand as a response,' Zahra proposed during yesterday’s analysts briefing. Zahra and the man charged with driving David Jones’ omni-channelling, David Robinson, went on to highlight past digital misjudgements by focusing on the cost and opportunity advantage that comes with being a ‘virtual laggard’. The positive seems to be that being late means the technology costs less, its installation is easier and its embrace is faster. But the fact remains Zahra and Robinson are saying unambiguously that they are late to the internet party and as a result the need for speed is now intense.”

The Sydney Morning Herald’s Ian Verrender says Zahra’s job might not be in jeopardy, but the company could be destined for a new fate.

"Was. Is. Always. Hmm, maybe not for too much longer. Paul Zahra may have secured his position as the head of upmarket retailer David Jones this week after some murmurs rattling around the market about his suitability to run the company. But after a two-day trading halt, a set of shocking numbers and a less-than-convincing blueprint for the grand old emporium's future, Zahra may have unintentionally set the scene for DJ's grandest sale ever – for itself. David Jones would have to be a sitting duck for a takeover right now. And given the recent frenzy from private equity groups salivating over the prospect of securing Billabong, attention surely must now switch to David Jones.”

And fourthly, The Sydney Morning Herald’s Malcolm Maiden says DJs simply wasn’t good enough on the decline in earnings from the American Express alliance.

"DJs made a mistake last year when it decided to ignore analysts' estimates and media reports about the impact of the recasting of its credit card joint venture with American Express in 2014. Then on Monday this week it suspended trading in its shares, after The Australian Financial Review reported that credit card earnings were expected to halve from 2014 onwards following the termination of a revenue guarantee that American Express gave DJs when it acquired the retailer's credit card receivables in 2008. DJs suspended its shares not because the report was wrong, but because it wanted to present the news in the context of its strategic response to the earnings threats it faces, and its argument yesterday at a press briefing that the board only confirmed the full extent of the credit card hit at a meeting that began on Tuesday and concluded yesterday morning was hollow. There should already have been guidance on the credit card hit. It's as simple as that.”

While we’re on DJs, The Australian Financial Review’s Chanticleer columnist Michael Smith, the Herald Sun’s Terry McCrann, Fairfax’s Insider columnist Ian McIlwraith, and Richard Gluyas and Blair Speedy from The Australian offer their takes on the retailer – none of them particularly encouraging.

The other big company story this morning is the leadership changes at the top of Vodafone Australia, a joint venture between Vodafone Group and Hutchison Whampoa. The Australian’s Michael Bingemann says reading between the lines of the departure of Vodafone Australia chief executive Nigel Dews reveals Vodafone Group is reasserting itself over a partnership that has gone so terribly off the rails. But The Sydney Morning Herald’s Elizabeth Knight warns that the very future of the joint venture is in doubt.

In other company news, The Sydney Morning Herald’s Michael Pascoe says the market reaction to BHP Billiton’s clarifying comments has been way overblown. The Age’s Eric Johnston finds ANZ Bank boss Mike Smith playing down concerns about the housing market. And The Australian’s Criterion columnist Tim Boreham says the consumer recovery call looks a bit early, as he runs the eye over David Jones, OrotonGroup and Kathmandu. He also takes a look at BHP Billiton, Rio Tinto and Intrepid Mines.

The Australian’s Rowan Callick says Ken Henry has a mighty task ahead of him in what could be his swansong from the public service, drafting the white paper on "Australia in the Asian Century” for the Gillard government. This is a good piece that might have got more attention had David Jones shares not lost 11 per cent.

And finally, The Australian’s Robin Bromby wonders why Federal Reserve chairman Ben Bernanke has such a problem with gold standard proponents.

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