Dick Smith Shares Smashed After Profit Downgrade, Concerns Over Stock Levels + Margins
Shares in Dick Smith have plunged 30% after the Company cut its full-year profit guidance by around 15%.
CEO Nick Aboud has said that gross margins have been squeezed, ChannelNews understands that the mass retailer has told several vendors who were expecting Xmas orders from Dick Smith buyers that no new orders will be forthcoming due to the Company failing to shift stock in stores and their warehouses.
Dick Smith now expects 2016 net profit to be $5 million to $8 million below its previous guidance of $45 million to $48 million and consensus forecasts around $45.3 million.
Recently the Company had two senior merchandising managers quit, 3 buyers along with Rod Orrick the General Manager of buying. Orrick left for health reasons.
Shortly after the results were announced investor took an axe to their stock forcing their share value down to 89 cents.
In comparison Harvey Norman announced that they are heading for a second year of double-digit profit growth after announcing a 27.4 per cent rise in net profit to $141.9 million in the December half, executive chairman Gerry Harvey has flagged a strong second half after same-store store sales jumped 8.8 per cent in January.
Franchisee sales in Australia rose 1.9 per cent to $2.53 billion, with like-for-like sales rising 2.8 per cent in the December and September quarters, while sales from company-owned stores, most of which are overseas, rose 8 per cent to $839.3 million.
Franchisee sales revenues have now risen for eight consecutive quarters, prompting Mr Harvey to declare that the worst is over for Harvey Norman after several years in the rough.
In a statement issued to the stock exchange today Dick Smith CEO Nick Abboud said strong sales growth in unlocked phones and fitness products was offset by disappointing sales in tablets, gaming and accessories.
Channel mix was also negative, with strong online sales growth offsetting softer retail store sales, impacting gross margins.
“Heightened promotional activity and unfavourable product and channel mix intensified to adversely impact gross margin in October, as we undertook promotional activity to stimulate sales and protect market share,” he said.
“Even with this promotional activity, October sales were disappointing with growth well below the level achieved in the first quarter,” he said.
“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,” he said.
Dick Smith has revived its “daily deals” campaign on television and radio this week
Currently Harvey Norman is now rolling out a company and franchisee-wide merchandise, inventory and supplier SAP management system after testing the system in New Zealand stores late last year.