Investors last heard from Woolworths on July 24. No earnings guidance was provided but the statement did reassure investors that “actions taken have ensured that the balance sheet remains robust”. We believe that the complexity of dealing with the deteriorating David Jones situation in Australia is not fully appreciated.

The failure of David Jones could trigger the failure of Country Road Group (CRG), which could then possibly affect the equity of the holding company in SA. The genesis of this domino effect is the “common terms deed”, referred to in the 2017 annual report, which links the fortunes of David Jones and CRG. Entering this agreement was the “original sin” and it presents a significant risk. Acquired in 2014, David Jones has declined dramatically, and Woolworths has been forced to write down the A$2.2bn (R27.5bn) investment twice, first by A$712m in 2018, and again in 2019, by A$437m.

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