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Has dick smith ceo resigned, page-10

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aussieman69

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02/12/15

10:38

Post #: 16527215
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Originally posted by pipebuilder ↑

Gerry Harvey ridicules talk of Dick Smith ‘fire sale’

THE AUSTRALIAN DECEMBER 2, 2015 12:00AM

Retail billionaire and Harvey Norman chairman Gerry Harvey says any attempt by ailing consumer electronics chain Dick Smith to kick off a 70 per cent-off fire sale to shift unwanted stock would be “suicidal”, arguing that shoppers have no interest in picking up “crook stock”, even at bargain prices.
The massive fire sale only three weeks before Christmas could decimate earnings in the nation’s highly competitive $16 billion consumer electronics sector as intense competition forces rivals such as Harvey Norman or JB Hi-Fi to match prices on TVs, iPhones, iPads and other popular products to maintain shopper loyalty.
Threats of a looming price war emerged on Monday as Dick Smith shocked the market with an admission that it had lost control of its inventories and would be forced to book a $60 million non-cash impairment against its first-half accounts as it shoves goods out the door at knockdown prices to clear stock levels.
Dick Smith shares, which floated at $2.20 in late 2013, crashed by 70 per cent on the news, as well as the retailer announcing it was scrapping its earnings outlook.
Shares touched a low of 20c during hectic trading.
The stock rebounded yesterday, gaining 7c, or 25 per cent, to 35c, but analysts and investors now fear for the future of the beleaguered retailer. The future of its CEO Nick Abboud is also unclear.
The drama threatens to engulf the entire sector in a margin crunching price war, as speculation grows Dick Smith will launch a fire sale that could see promotions as deep as 70 per cent off.
“They can’t do that — they are in dire trouble now,” Harvey Norman chairman Mr Harvey told The Australian yesterday.
“That will only make it so much worse for them. They are not making any money if they sell everything in a fire sale. They will lose a lot of money. Why would they do that — that’s committing suicide.’’
Mr Harvey said Harvey Norman, which has forecast a buoyant Christmas trading period following a bumper first quarter, would remain competitive whatever corrective action Dick Smith took to drag itself out of its earnings hole.
“We always are competitive — doesn’t matter who it is. But Dick Smith’s problems, if they go out and sell everything at a silly price, well, they are not making any money now — imagine how much money they will lose if they do that (a fire sale).”
Mr Harvey said it was “inconceivable” that a retailer like Dick Smith could find themselves in such trouble over inventory levels. And he warned that shoppers might not scoop up any bargains shoved in their direction.
“It’s crook stock and they are going to get rid of it, but if it’s crook stock people don’t want to buy it unless they sell it for next to nothing.
“And so in the electronics world at the moment people want a bargain on good stock, not a bargain on crook stock — why would want to buy crook stock?”
Deutsche Bank retail analyst Michael Simotas said that following Dick Smith’s AGM in October, when the retailer issued its first profit warning, he had suspected the retailer had an inventory problem.
“Our suspicions have been confirmed … but the sheer size of the inventory impairment suggests the problem is much worse than we feared,” Mr Simotas said.
“With this marking the second downgrade in a month and with the credit metrics tightening, Dick Smith is likely to experience significant downward pressure in the short-term.”
He said the wider impact on the consumer electronics sector was also a concern. “Of more interest to us is the potential impact on the broader consumer electronics sector. We are reminded of the events of 2011-12 when the failure of Woolworths Sight & Sound and the closure of around 70 Dick Smith stores by Woolworths drove significant industry margin pressure.”
Mr Simotas said JB Hi-Fi’s gross margins fell by roughly 100 basis points in fiscal 2012 as a result of inventory clearance following these closures.
“We believe discretionary retail conditions are much better now …
“However, we expect Dick Smith to move quickly to try to clear its inventory problem, and the timing is most unfortunate, given it will likely result in heavy industry discounting over the key Christmas trading period.”

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Gerry Harvey has to say that!
DSH Price at posting: 39.0¢ Sentiment: Hold Disclosure: Held
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