Dick Smith changes gear after downgrade

Dick smithAustralia’s third-largest consumer electronics retailer, Dick Smith, has downgraded its full year profit guidance while announcing sales growth of 6.9 per cent for the first quarter of 2016.

In this downbeat year where its October sales were discouraging despite promotional activity and its profits are predicted to plunge 15 per cent, the company has kickstarted a discounting and marketing war to turnaround its keen drop in sales and market share.

It launched its “Dick Smith Live Daily Deals” campaign on television and radio this week to drive customers to its stores and has has flagged deeper discounts on brands such as Apple and Fitbit and products such as big-screen televisions to boost foot traffic and sales.

The company anticipates net profit after tax for financial year 2016 could be A$5 million to A$8 million lower than the previous guidance of A$45 million to A$48 million.

“Given the October performance and expectations of challenging and variable market conditions, we are cautious about the outlook for the all-important Christmas trading period,” said Dick Smith MD and CEO, Nick Abboud.

“We’re going to drive top-line sales and cash conversion through this period and get momentum back in the business. We’ll drive top-line sales and market share through to Christmas in an aggressive way.

“When things are tough, you have to change gears.”

During the period total sales increased 7.5 per cent to A$1.32 billion with gross profit up 6.1 per cent.

Gross margin was adversely impacted by product and channel mix, with strong online sales offset by softer retail store sales.

Online sales doubled to more than eight per cent of retail sales, with financial year 2017 forecasts expecting to reach 10 per cent.

“Sales for the first quarter have improved on the prior year and last quarter, with New Zealand experiencing its best quarterly sales performance since acquisition,” said Abboud.


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