Hmm. I know Dick Smith well and know people who worked in the Finance team.
Let me provide a history ...
1. Dick Smith was built on rebates. DSK is not.
2. Gross margin was only 27% not 63% like Dusk had zero flexibility and was in electronics with sub 15% Gross Margins. Go ask Katie Page what she thought about Dick Smith pricing.
3. Dusk is vertically integrated Dick Smith was not
4. Payables went to 110 days for Dick Smith. Dusk is sub 40.
5. Dick Smith managed the business on a rate to sales basis (i.e. %) not on $. Dusk manages on gross margin $. You must run a retail business on $ to know operational leverage and your buy rate to protect the downside. John Joyce is ex ALDI if you study the company history you understand.
6. Dick Smith did fair value adjustments on the positive side to inventory in 2012 that were write-backs. This is crazy and a que before it blew up. Dusk does not.
7. Dusk operates with near negative working capital and a 80% ROFE. Dick Smith did not have this as its ROFE was 4% which was below its debt cost.
8. Dick Smith was rolling out space fast (like Eddy Grove learning centres! Remember him!). Dusk is going slow at 8% p.a. the ALDI zone approach. Land and expand.
9. Debt – Dick Smith gearing was out of control. Dick Smith had $130m Equity but $300m of Debt. Dusk is doing 50% ROE and has net cash of $32m (not $16m) because the cash flow and P&L do not match for Dusk because they provision tax ahead of time
10. Lease Liabilities – Dick Smith pushed out lease liabilities terms to improve cashflow with milestone payments at the end of term. DUSK does not do this.
11. Required Capital – Store fit-outs for Dick Smith were capital intensive with a 3-year payback. The store payback for Dusk is 9 months
12.Inventory Turn – Dick Smith Inventory turn was 2-4 times year. DUSK inventory turn is 8-14x.
13. Dick Smith was flying Executives to Las Vagas with Panasonic etc. for parties. Dusk operates with less than 50 people in H/Q. It is a very lean organization. The people inside Dusk are long tenure.
14. Dick Smith was run by Bankers not retailers. Plus the CEO was ex-Lion and had not run operations or commercial, he was out of his depth.
15. Anchorage – has form with liquidations and boosting of profits and changes in inventory with Burger King, Dunlop, Grosby and Julius Marlows. Anything from Anchorage is avoid.
could go on .....
and yes retail has been in my DNA a long time .... i ran retailers
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1 | 2300 | 1.035 |
2 | 10029 | 1.020 |
Price($) | Vol. | No. |
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1.105 | 600 | 1 |
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