Despite a sales hike of 6.9% and an increase of 1.3% in comparable sales, Dick Smith has cut its full-year profit guidance by $5 to $8 million, plunging company shares by up to 30%. In a company statement, managing director and CEO, Nick Abboud described sales as “disappointing” in the tablet and gaming category, despite strong sales growth for phones and fitness products. Gross profit was adversely affected by promotional activity and an unfavourable product mix.
Speculation is growing within financial circles that JB Hi Fi may be a potential buyer to takeover Dick Smith Electronics (DSE) after Luminis Partners was secured by DSE for an advisory role. This is being perceived as a pre-emptive move by the retailer to fend off any prospective suitors.
Dick Smith Holdings has been hammered by the sharemarket with shares falling to a record low of $1.65, before closing down 16.5% at $1.67 yesterday. Analysts have attributed the fall to the company’s decision to stop discounting Apple products, a significant driver of sales over several years and to soft sharemarket conditions.
There is no animosity between JB Hi Fi and Dick Smith, according to JB’s CEO Richard Murray, a statement which is most likely true, given that both these retailers have a common target in their sights: David Jones and Myer. According to Murray, the industry can be assured that JB is determined to ‘own’ the portable appliance category, despite its deep legacy in technology and gadgets.
A significant industry shift is underway with today’s news that JB Hi Fi is already selling small appliances inside four of its eponymous JB Hi Fi stores. The move comes just a week after Dick Smith announced the almost identical strategy to range small appliances (Connected Home) inside several of its existing Dick Smith stores.