Floors in its Cairns and Castle Hill stores have also shut, and in April UBS analysts predicted 15 of Myer’s 58 stores would be up for lease renewal by 2025, providing Myer an opportunity to exit or downsize a number of its locations.
But it’s not just the top end of town facing losses.
Woolworths discount Big W department store flagged the closures of 30 stores earlier this year, with its Chullora, Auburn and Fairfield sites to close by January.
Average sales per square metre at Big W have declined by more than 15 per cent since 2013, and the company has continued to be loss making since 2016, despite Woolworths pledging to return it to profitability.
Closures and store shrinkages for Wesfarmers’ Target are also on the cards after it weathered a $300 million impairment and a 0.8 per cent sales drop over 2019.
As these giants of retail move to downsize their store footprints, landlords are scrambling to fill the vacant space they leave behind.
“They’re all under the pump; they’re all definitely closing stores,” Harvey Norman executive chairman Gerry Harvey said.
“I think the shopping centres have all taken into account that’s going to happen, it’s inevitable, and they are looking now at what do we replace those sort of [retailers] with.”
David Jones has already shown what its future will look like as it renegotiates expiring leases – it is cutting its floor plates in half.
This month it opened a significantly downsized store in Vicnity’s newly refurbished The Glen shopping mall in Melbourne’s eastern suburbs.
In a shift from its traditional focus, the retailer beefed up personal shopping services and brought its Country Road brands – Mimco, Trenery, Witchery, Politix and Country Road – inhouse, reducing their standalone presence in the main mall.
The new shop floor was reduced from 14,000 square metres to 8000 square metres in the process.
It has taken the same approach with its Westfield Carindale outlet, east of central Brisbane.
There David Jones is currently trading from the top floor, only half of its former 15,000sq m tenancy.
Following a $50 million renovation – 50 per cent of which will be footed by mall owner Carindale Property Trust – it will move into the bottom half in November, taking just 7635 sq m.
Carindale managed to backfill David Jones’ upper level with a Kmart store.
J.P.Morgan analyst Ben Brayshaw said the backfill reduces theleasing risk and was a good outcome, minimising downtime and maximising lettable area.
But push back from department stores such as David Jones and Myer will inevitably be disruptive for centre landlords’ earnings.
“It locks in a relatively low rent, in our view, which is dilutive to our forecast net income,” he said.
Retail giant Scentre Group has the largest exposure among Australia’s landlords to Myer and David Jones.
Between them, the departments stores occupy nearly 18 per cent of Scentre’s gross retail leasing area, across some 40 stores that have an average lease expiry of about nine years.
“The department store format continues to have a role in Scentre’s portfolio because customers want it,” a Scentre spokesperson said.
“We always work closely with our retail partners to help them execute their business strategies, which sometimes includes right-sizing their businesses so that we can both drive productivity.”
Vicinity hosts about 14 Myer and David Jones stores, all in high-performing locations. A spokesperson said the flagship stores provide 6.1 per cent of rental income for the group.
“There is an opportunity for us to re-purpose any excess space and generate improved traffic and sales,” the Vicinity spokesperson said.
Property Editor at The Age and BusinessDay journalist for Fairfax’s theage.com.au, smh.com.au, watoday.com.au and brisbanetimes.com.au.
Dominic Powell writes about the retail industry for the Sydney Morning Herald and The Age.