Dick Smith Nosedive In ‘2 Speed’ Stores

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Sales at Dick’s declined as retail woes continue to mount. Woolworths just announced first fiscal quarter group sales of 1.46bn – a jump of 4.9% on same time last year.

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However, Woolies owned CE retailer Dick Smith failed to enjoy the same sales growth momentum falling 2.1% to $326m, with comparable store sales dropping 5 percent (from July – October 2 quarter). 

This marks a disappointing perfomance compared to previous figures which saw the retailer report 7.1% rise in comparable for the full year to June 26.

However, the group said its performance in electronics was a “reasonable relative to the sector.”

Overall, total electronics sales for the Woolworths group grew 0.8% to $485m.

The consumer electronics sector continues to be plagued by poor economic conditions, continued high price competition and price deflation in key products exacerbated by the strong Aussie dollar, Woolworths said in a statement today.

And it appears Dick Smith are performing at a two speed operating environment with revamped stores enjoying good sales figures, while the older formats slumped.

“While the business is in transition, the new format stores, which are now 71% of the total store network are outperforming older format stores and achieved sales growth of 4.2%,” said Debra Singh, Consumer Electronics CEO.

More than half of all stores are in the “optimal size new concept format,” which delivered 5.2% sales growth. It has spent $80 million investing in new store formats over the past two years.

But it closed more stores than they opened – shutting 14 locations while opening just seven new shops.

DS also said multichannel offer which includes online has “displayed strong growth in customers and sales.”

Woolworth’s Indian CE interests in partnership with Tata fared better with its 68 stores network enjoying sales jump of 18.5% to $96m.

Dick Smith New Zealand isn’t faring well either dropping back 4.8% due to price deflation and “challenging macro environment”.

This comes as analysts Merrill Lynch warned this week Dick Smith was headed for major trouble due to underperformance ”to a degree no players would have anticipated.”

 

”If the Dick Smith business were to be rationalised or consolidated with Big W, increased consumer caution and higher domestic savings rates would expect this to further strengthen (JB Hi-Fi’s) position as the market leader,” the analyst report warned.

Sales have grown about 20% or $325m since 2009, profits slumped by a whopping 60% or $36m.

In its home improvement division, Woolies enjoyed growth of 6.2% to $188m, which included one month of revenue from its new Masters retail network.

Commenting on the group sales for the latest quarter, Woolies CEO Grant O’Brien said: “It was a solid start to the year considering retail conditions remain challenging.”

Woolworth’s share price appeared unchanged at $24.15 following the announcement, although the ASX system has crashed temporarily.

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