Background: David Jones is one of Australia's oldest department stores, founded nearly 200 years ago. David Jones has been on quite the journey over the past decade, with Woolworths Holdings acquiring DJ'sfor $2.1 billion back in 2014. After many years of losses, it was sold to private equity firm Anchorage Capital Partners for just $92.5 million in 2023.

What happened: While performance has reportedly improved slightly, David Jones has now made a major change to how it pays suppliers. Back in January, the company told suppliers it needed to extend payment terms for that month due to a new computer system. While suppliers initially agreed to one month of delays, David Jones has now made it permanent.

It will now pay suppliers up to 60 days after products are sold in-store - meaning it can sell an item today and not pay for it another two months.

What else: It will now pay suppliers up to 60 days after products are sold in-store - meaning it can sell an item today and not pay for it another two months. By delaying payments, David Jones gets to hold onto cash for longer, it's trying to give iself positive working capital.

What's the key learning

💡 Working capital is the difference between a company's short-term assets and short-term liabilities. In simple terms, it's all about timing - when cash comes in versus when it goes out.  

💡 Retailers benefit from getting paid fast and paying suppliers late. For instance, if a customer buys a $100 item today and the retailer delays payment for 60 days, that's 60 days of extra cash to use elsewhere... creating a powerful cash buffer known as a positive working capital cycle.      

💡 But stretching payments comes with trade-offs. While typical terms in Australia sit around 30 days, pushing it to 60 days can help cash flow. However, it may strain supplier relationships and erode trust over time.