How the industry knew the retailer’s days were numbered long before it did.

Gerry Harvey won’t touch the brand with a barge pole, The Good Guys is trying to buy back its own stores and JB already owns Australia’s digital retail space. This would only leave another venture capitalist or a global retailer hankering to set up in Australia to purchase 393 Dick Smith stores.

As these last options could be considered very long shots, it leaves the question: if neither Woolworths nor the board and management of Dick Smith Holdings could run the business profitably, how could anyone else?

dick smith chairman

Dick Smith chairman, Rob Murray

Harvey plainly told Fairfax yesterday that Dick Smith “is not our sort of business”.

“We have shops that over the years we have to close because they just can’t make money,” he said. “For whatever reason the position, the size of the shops, they just get to a stage where – its useful life is now over.

“If you have one, two, three, four hundred of those sort of shops and 70 or 80 % of their useful life is over the whole company’s useful life is over. I had no confidence whatsoever that the business could be resurrected (by its new owners) – I just saw it as a 100% loser.”

Harvey has been even more forthcoming about lessons he learned from past investments in insolvent businesses. He has also told Fairfax media that he lost more than $100million after agreeing to take over most of the stores of collapsed Clive Peeters Group in 2010. Added to this was the takeover of a chain of Coles Myer Megamart stores in 2005.

“If I had that chance again, I wouldn’t have taken it. I’m still paying for some of those leases years later,” he said.

These  experiences are etched so deeply into the Harvey psyche so when a Harvey director told me in late November that “it was over” for Dick Smith, I knew he was right.

Why?

The Harvey Norman board is packed with seasoned retailers, who have weathered the distinct vagaries of an industry which doesn’t seem to behave like any other. In other words, they have seen it all professionally and personally.

Close behind Harvey is the highly acclaimed board and management team of The Good Guys, also long term industry players and then the smarts of those leading JB Hi Fi which itself launched a countercultural model over a decade ago and hasn’t looked back since.

Now to the Dick Smith board and management. Once Anchorage Partners (they made $500 million from DSH in two years)  severed its director links with Dick Smith 10 months ago, the board and management were solely at the helm.

It appears that the board had limited depth of retail experience . Although chairman Rob Murray (pictured above) was also chairman of Metcash and former director of Super Retail Group, that seems to be about it.

The lack of industry know-how and intuition was apparent in two areas, first in the business plan given to CEO Nick Abboud to execute for 2015 and secondly, the shocking apparent lack of skill to manage both debt-load and cashflow.

By charging CEO Nick Abboud with the extraordinary task of keeping the company a player in a highly aggressive and competitive market where margins on digital products are wafer thin, they had given him a mammoth task. But this was compounded by simultaneously trying to expand store footprints and launch into the small appliance category directly up against JB Hi Fi. This was unfeasible and could be considered negligent.

The fact that this new direction was launched just six months ago and involved new senior executive recruits and relationships with small appliance suppliers that the company had not previously worked with would have been risky even if its balance sheet was solid.

But it wasn’t, and we now know that there were long term inventory problems that finally sparked a $60million inventory warning in October. This was just two months after Abboud launched the Dick Smith Connected Home concept in August.

It seemed that the dangers within the Herculean task to be driven by Abboud was apparent to most seasoned industry players, but not the DSH Board. That, along with investor and creditor losses and now the uncertain fate of 3,300 staff is the true sadness of this sorry business.