Kirkcaldie and Stains has announced it will close next year after David Jones bought the Wellington department store.

Troubled Wellington department store Kirkcaldie & Stains, affectionately known as Kirks, is poised to shut its doors next February.

But Kirks chairman Falcon Clouston said the silver lining was that the site would reopen as the first New Zealand store of Australian retailer David Jones, which aims to retain most of the 270 staff.

Kirkcaldie & Stains is the oldest store in New Zealand still trading under its original name, dating back to 1863, and has been the city's leading department store for generations.

Kirkcaldie and Stains staff were called into a meeting on Thursday afternoon.

But the business has been losing money, revenues have fallen and the company lacked the scale to foot it with other big chains. Kirks has been thinking about selling the business, downsizing or reinvesting for the past few months.

If shareholders approve the deal, the Kirks name will disappear and the new David Jones store will open in mid-2016 after a big revamp, worth as much as $20 million.

Announcing its plans to media, Clouston could not mask some regret at the prospect of the 152-year-old store's closure.

"The end of Kirkcaldie & Stains as a much-loved Wellington department store has been a very difficult decision to make, but we believe it is in the best interests of the company, the staff, our customers, and Wellington," he said.

"I think as a single-large format store, we lacked the scale to compete with the multi-store regional and global operators and the brands that are beginning to dominate that new landscape."

And while he was sad for the brand, he was glad for the staff and for Wellington because the Australian retailer would bring big brands to the city and "revitalise Lambton Quay".

In Australia, David Jones is known for its own house brand, but also includes upmarket labels such as Christian Dior, Gucci, Jimmy Choo shoes, and Victoria Beckham.

Clouston said the deal was a good solution. It secured a brighter future for the staff, for suppliers, customers and "would enhance the appeal of Wellington as a shopping destination".

David Jones was planning to spend a lot of money on the store's interior, while retaining its historic facade. And while the name on the store frontage would become David Jones, Kirks' signature trademark would probably pop up somewhere.

"They may name part of the store, something like that or whatever, they haven't made those plans clear. But they've told us they want to preserve the brand somewhere."

David Jones is owned by South African company Woolworths Holdings, which also owns fashion chains Country Road and Witchery.

Speaking via a press conference, David Jones chief executive Iain Nairn said on Thursday he was "confident this beautiful building in this cosmopolitan city is the perfect home for our first New Zealand store".

Asked whether Wellington had a big enough population to sustain a flagship store, Nairn replied: "It's a bit opportunistic. When we were approached by Kirkcaldie and Stains, it wasn't on our agenda. But if we were going to enter Wellington, this was the store that we would have wanted."

He was already familiar with Kirks which sold some of their brands and the Country Road brand had been successful here too.

"We have 35 stores and 500 staff already in New Zealand, we have a great business in Wellington ...so I understand the potential.

"Auckland is the biggest market but we strongly believe in the Wellington market, it's a great customer, it truly understands fashion."

There were no immediate plans to open more stores in New Zealand, he added, although he couldn't rule that out in years to come.

Meanwhile, lovers of Kirks' famous sales will still be able to enjoy the store's traditional August and January sales before it closes.

The stock is Kirks' to sell, and Clouston said they would start selling some of their furniture in the warehouse the company leases on Thorndon Quay.

It would hold on to its Petone headquarters for at least a year.

Kirks recorded a $6.5 million loss last year, mainly a loss on the sale of the Harbour City Centre, after reporting a $168,000 profit the previous year. For the half year ended February 28, the business made a loss of $501,000.

WHAT CUSTOMERS NEED TO KNOW

Gift vouchers will probably have to spent before the store closes, but there is a chance that David Jones could exchange them for its own.

Kirks' 5700-odd active loyalty cardholders would have to spend up their points before the closure.

Kirks' investors saw their shares jump 47 cents or 28 per cent, to $2.15 with the prospect of a big payout after the David Jones deal.

The Kirks name will disappear at the end of January next year.

The new David Jones store will open in mid-2016 after a big revamp, worth as much as $20 million.

"I'M IN A STATE OF SHOCK"

Longtime customer Heather Mulholland estimated she had been going to Kirks for 65 years.

"I'm just in a state of shock," she said. "It's an institution. I've been going since I was a little girl from a very young age for afternoon tea with my mother."

She had been to David Jones in Australia and did not think it matched Kirks' "character."

"It's a department store with nothing particularly different about it, whereas Kirks had a certain something."

Georgia Waddell said she "loved" David Jones, though would miss Kirks. She and friend Kirsty Shiner said they visited Kirks for its specialist beauty department, Mecca Cosmetica. Shiner said it stocked makeup brands she couldn't get anywhere else in Wellington, and she would shop at David Jones if it carried those brands.

Wellington Mayor Celia Wade-Brown said the city would miss Kirks, but welcomed David Jones' investment in the Golden Mile shopping precinct.

"I'm also heartened by the company's pledge to offer employment to the majority of existing Kirks staff and hope that staff will be managed with the appropriate kindness through this uncertain time," she said.

Retail NZ chief executive Mark Johnston said the international store would bring in competition the market needed. "Shoppers are likely to benefit from new brands and new products, underpinned by the economies of scale that a major Australian store can bring".

KIRKS HISTORY

Kirkcaldie & Stains was set up in 1863 by Scotsman John Kirkcaldie and Englishman Robert Stains.

The two entrepreneurs had a pooled capital of £700 and built a store in Waterloo House, (now the historic Bank of New Zealand building) out of timbers of a wrecked ship.

In 1868 a larger store opened at the corner of Lambton Quay and Brandon Street, part of the store's present location.

In 1897 the store was expanded on the existing Lambton Quay site, and again in 1908. The 1908 building was surrounded by the façade which remains the hallmark of the company today. Kirkcaldie & Stains is the oldest store in New Zealand still trading under its original name.

WHO IS DAVID JONES?

Welsh merchant David Jones opened his first store in Sydney in 1838. His mission was to sell "the best and most exclusive goods".

David Jones has nearly 40 Australian stores, two warehouse outlets and David Jones Online, offering customers about 1700 brands across fashion, beauty and home.

The range of brands on offer in the Wellington store will be determined by market research. There are already 130 crossover brands between David Jones and Kirkcaldie & Stains.

The company was acquired by South African-based Woolworths Holdings company, which also owns the Country Road, Witchery, Mimco and Trenery brands, for $2.2 billion in 2014.

David Jones was struggling with three years of falling profit and sales when Woolworths made its approach. Under the new ownership, profits are improving. In February its half-year profits were up 10 per cent.

TERMS OF THE DEAL