Gerry Harvey, retail expert, the Chairman of Harvey Norman, and a person who can spot “crap” stock a mile off has described the attempts of Nick Aboud the CEO of struggling retailer Dick Smith to shift bucket loads of inventory in a 70% off sale as a “suicide” exercise.
He claims consumers are not stupid and can spot “crook” stock even when they are offered at bargain prices.
He knows because he has done it himself a few times.
ChannelNews knows from sources in Hong Kong that Dick Smith has what has been described as “a mountain of house brand stock” that has failed to sell in their stores.
Mr Harvey said Harvey Norman, which has forecast a buoyant Christmas trading period following a bumper first quarter, would remain competitive whatever corrective action Dick Smith took to drag itself out of its earnings hole.
He told Fairfax Media “We always are competitive – doesn’t matter who it is. But Dick Smith’s problems, if they go out and sell everything at a silly price, well, they are not making any money now – imagine how much money they will lose if they do that (a fire sale).”
Mr Harvey said it was “inconceivable” that a retailer like Dick Smith could find themselves in such trouble over inventory levels. And he warned that shoppers might not scoop up any bargains shoved in their direction.
“It’s crook stock and they are going to get rid of it, but if it’s crook stock people don’t want to buy it unless they sell it for next to nothing.
“And so in the electronics world at the moment people want a bargain on good stock, not a bargain on crook stock – why would want to buy crook stock?”
Threats of a looming price war emerged when Dick Smith management admitted that they had lost control of its inventories and would be forced to book a $60 million non-cash impairment against its first-half accounts.
Analysts and investors now fear for the future of the beleaguered retailer. The future of its CEO Nick Abboud is also unclear.
Dick Smith’s answer is to launch a fire sale that could see 70% slashed off goods. The big questions are which goods.
“They can’t do that – they are in dire trouble now,” Harvey Norman chairman Mr Harvey told The Australian yesterday.
“That will only make it so much worse for them. They are not making any money if they sell everything in a fire sale. They will lose a lot of money. Why would they do that – that’s committing suicide.”
Mr Harvey said Harvey Norman, which has forecast a buoyant Christmas trading period following a bumper first quarter, would remain competitive whatever corrective action Dick Smith took to drag itself out of its earnings hole.
“We always are competitive – doesn’t matter who it is. But Dick Smith’s problems, if they go out and sell everything at a silly price, well, they are not making any money now – imagine how much money they will lose if they do that (a fire sale).”.
