Former Harvey buying executive in the headlights.

The underlying structural weakness of Dick Smith, revealed in full this week has the potential to quickly undermine the sales and profit potential of an industry as it faces its most critical sales period.

dick smith chairman

Dick Smith chairman Rob Murray

Reports are already dribbling into Appliance Retailer of soft November sales in some categories. This, and the prospect of a price discounting battle predicted to break as early as this Saturday, could slash profits for industry retailers and suppliers.

Yesterday, industry leader Gerry Harvey moved quickly to block consumers from flocking to any 70% fire sale by Dick Smith by describing the products as “crook stock”, even at bargain ­prices.

Harvey has said that Harvey Norman, which has forecast a buoyant Christmas trading period following a strong first quarter, would remain competitive whatever corrective action Dick Smith took to offload $60 million inventory.

Harvey added that it was “inconceivable” that a retailer like Dick Smith could find itself in such trouble over inventory levels.

The mystery man in the equation: Rod Orrock

And he would know. One of his senior executives, Rod Orrock, left Harvey Norman in June 2014 to take up the role of director of buying and marketing at Dick Smith.

Within a brief 14 months, Orrock had made deep changes to the retailer’s direction and is reported to be the driver behind the opening of 25 new Dick Smith stores, a move into appliances as well as the setting up of a Dick Smith store at Sydney International airport.

But less than one month after Dick Smith reported its full year results (see below), on August 18, Orrock suddenly left the company on September 15.

According to Dick Smith, Orrock’s departure was due to ‘health reasons’. He was replaced by Mark Scott who has continued in his role as director of operations.

Now, a brief eleven weeks later, the company is fighting for its life.

Dick Smith timeline to disaster

August

On August 18, Dick Smith reported sales growth of 7.5% for the 52 weeks ended 28 June 2015, with comp sales increasing 1% and net profit after tax (NPAT) before restructure costs improving 3.1% to $43.4 million.

September

On September 15, director of buying and marketing, Rod Orrock departs the company after just 14 months.

October

On October 28, Dick Smith held its Annual General Meeting and cut its full-year profit guidance by $5 to $8 million, plunging company shares by up to 30%.

November

On November 30, Dick Smith managing director, Nick Abboud revises down October profit guidance with a warning of more write-downs.