Struggling consumer electronics retailer Dick Smith is set to be put up for sale after owners Woolworths, indicated that they were not happy with the performance of the operation.Struggling consumer electronics retailer Dick Smith is set to be put up for sale after owners Woolworths, indicated that they were not happy with the performance of the operation.
According to Woolworths latest financial results sales at Dick Smith declined in the last quarter as it struggles with small footprint stores and a lack of difference from the likes of JB Hi Fi. Also impacting the Company is a move by Big W to sell similar products to Dick Smith including budget TV’s Apple products as well as a budget range of home entertainment and IT products.
Woolworth’s chief executive Grant O’Brien says its investment in the Dick Smith electronics chain will be reviewed and a sale of the poor performing business is now a possibility.
Addressing investors at its strategy day this morning, Mr O’Brien said he wanted to re-establish Woolworths marketing supremacy around value and growth, while the company will also focus on rebuilding momentum at its Big W merchandise chain which is currently competing head on with Dick Smith in several categories.
In the last quarter Dick Smith sales fell 2.1% to $326m, with comparable store sales dropping 5 percent (from July – October 2 quarter).
In the prior quarter the retailer report a 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.
Currently Dick Smith stores 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 last month that Dick Smith was headed for major trouble due to underperformance ”to a degree no players would have anticipated.”
He said Woolworths needed to improve its consumer electronics business, Dick Smith, with a review of the underperforming operation to be conducted. It is a possibility that Dick Smith could be sold.