Although the Dick Smith announcement has come as a shock, the share price has been struggling over the past months, driven largely by aggressive discounting of Apple products across the sector to secure foot traffic.
Dick Smith’s focus on securing foot traffic means strong Christmas performance will be key to avoid inventory issues, particularly during the typically quieter months in the New Year. Given competitors, such as Harvey Norman, JB Hi-Fi and the department stores, have posted better results in the lead up to Christmas, they will enjoy a head start.
Larger retailers are competing for Christmas trade with well performing online mid-size players like Kogan and Winning Group appliances, who opted for strong customer focus rather than aggressive discounting, and are now reaping the benefits of increased consumer willingness to buy white goods and other products online. Some importers have managed the falling dollar better than others and this has flowed through to the retailers in some cases, enabling them to achieve better margins whilst still remaining competitive.
Electrical retailer, Dick Smith, was unable to reaffirm its profit guidance today following disappointing sales performance in October and November. The retailer is undertaking a review of its inventory levels conducted by external consultants and will take a non-cash impairment charge of $60 million.