Dick Smith gaining momentum but trouble looms across the Tasman

Despite a “flat” consumer electronics market, Dick Smith’s total sales for the first half of its financial year were up 8.9 per cent to $693.8 million, while net profit after tax (NPAT) was up 0.8 per cent to $25.2 million.

In the 26 weeks ended 28 December 2014 comparable sales were up 2 per cent. When looking only at Australian stores comparable sales were up 4 per cent. Overall results were impacted by a 9.3 per cent decline in New Zealand sales, caused by aggressive competitive pricing and deterioration in consumer sentiment, the company said.

Nick Abboud, Dick Smith managing director and CEO attributes the strong sales performance to the successful implementation of business’s growth strategy which was put in place 18 months ago and includes opening new stores and increasing the sales share of private label products.

“Throughout the half we were able to deliver sales growth and gained market share in our core categories. Achieving this growth is particularly pleasing given that independent industry data from GfK suggests throughout the half Australian consumer electronics were flat in terms of sales. This echoes our collaborative and successful approach in improving our brand and pricing perception in the marketplace and enables us to focus on key growth categories,” Abboud said.

“Our result this half reaffirms that our growth strategy is performing strongly. We delivered profitable comparable and total sales growth, despite challenging market conditions. We expect further strong performance from our growth strategy and anticipate approximately 10 per cent total sales growth in 2015.”

Central to its growth strategy is providing consumers with the products at competitive prices from locations and platforms convenient to them, Dick Smith said, which includes a network of 385 stores across Australia and New Zealand and multiple online purchasing platforms.

“Our growth strategy is based on the premise that we will ensure we are competitive in the marketplace but we will also focus on identifying new target customer groups not currently being catered for in the market,” Abboud said.

Since the implementation of its growth strategy 18 months ago Dick Smith has opened 65 new stores and plans to open nine more in the second half on this financial year.

Online sales now make up 7 per cent of retail sales, compared to 5 per cent in the same period last year.

“Our online operations have surpassed our expectations. Online sales continue to grow strongly and now represent over 7 per cent of our retail sales, compared to a run rate of over 5 per cent in 2H 2014. We anticipate achieving our objective of more than 10 per cent of retail sales online well before FY2017,” Abboud said.

The share of private label sales increased to 12 per cent during the half and is expected to make up 15 per cent of total sales by 2017.

The company has reported a strong start to the calendar year, January sales were up over 17 per cent and February sales to date are “exhibiting double-digit growth.” Total sales growth for the year to date now exceeds 10 per cent and comparative sales growth is over 3 per cent.

“Dick Smith is well placed to deliverer further strong sales and profit growth over the next 18 months. We have a solid growth strategy and a track record to date of delivering both sales and cost reduction targets outlined in our strategy,” Abboud said.

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