Woolworths Chief has announced his intention to sell off troubled Dick Smith despite sales jump of 3.1%.
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The supermarket giant announced first half year sales (FY 2012) of $29.7 billion, a 5% increase on last year – meaning the Australian retail sob story wasn’t so bad after all.
Supermarket (+5.6%), home improvement $412m (+16.4%), which includes its new Masters chain, and CE were all up at Woolies the first six month period July- Dec 31.
Its consumer electronics division which includes troubled chain Dick Smith grew by 0.7% for the half year to $405m but rose again by 3.1% for the most recent second quarter (Q2).
But the result wasn’t good enough for the supermarket giant, who announced its intention to offload the 320-strong chain of stores today, as previously tipped by Channel News.
“The investment and management attention given to Dick Smith have been disproportionate relative to its position within the Woolworths Group,” Woolworths CEO Grant O’Brien, said today.
“Dick Smith is an iconic speciality consumer electronics brand with a strong team and its own leading online presence.”
”We believe that separating this speciality business model from Woolworths is now the best option for the future of both businesses.”
“The future of Dick Smith, which is profitable,…..could be better realised through new ownership,” Woolies said in a statement.
The chain will be further restructured, following from the strategic review announced in November, and divested as a going concern to an appropriate buyer. The retailer will continue to operate as normal.
Woolies has recieved a “number” of offers for the troubled retailer which it said it would now explore. No word on who potential buyers would be as yet.
Consumer electronics continues to be hit by the poor current retail environment, price competition and price deflation in key products. But despite this, comparable store sales at the yellow retailer even rose compared to same time 2011 – by 2.4% over the six months and 4.8% for Q2.
Woolies said it will continue to grow CE division through Big W stores and made a restructuring provision of $300m for first half 2012.
“This is a good result for the business with second quarter sales being particularly strong in a difficult and very competitive trading environment,” Debra Singh, General Manager Consumer Electronics, said today.
Dick’s New Zealand sales also rose 2.2% for the half year and 8.4% in Q2.
However, it closed more stores than it opened during the first fiscal six months of 2012, bringing total number in Australia to 320, a closure pattern which has been repeated at rivals Harvey Norman.
Woolies CEO Grant O’Brien said he was happy with the “solid” numbers overall, despite subdued consumer sentiment affecting the retail industry, currently.
“The first half result was solid considering the ongoing headwinds facing the retail sector with subdued consumer confidence and significant deflation along with the change agenda we are driving through our business.
“The first half result includes 5.6% sales growth for our Supermarket Division, as well as sales growth of 16.4% in our Home Improvement Division that includes sales from our first seven Masters stores, which are trading in line with expectations.
“Overall customer numbers have increased, reflecting improved customer buying power through price deflation.”
On the Big W front, sales rose 1.3% for H1 although comparable sales fell 2.8% at the discount retailer.
Despite this slump, customer numbers and a number of items sold increased during Q2 while strong results were achieved in DVDs, Books, Toys, Sporting and Footwear categories.
Price deflation continued, averaging 5% most evident in Home Entertainment and Toys.
“Trading over the Christmas period was pleasing with positive customer and unit growth in December offset by deflation resulting in lower average basket sizes,” said Julie Coates, Director BIG W.
Woolworths share price rose 1.84% to $24.9 following the results anouncement today.