Dick Smith Research Paper

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LATEST IN FINANCE business retail
McGrathNicol releases Dick Smith report
JULY 14, 20162:39PM

Dick Smith in Northland closes for
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Mr Hayes said the failure of Dick Smith represented an unfortunate end for one of Australia’s iconic retailers.
“The collapse was made all the more significant given its speed and scale, just a couple of years after the successful public ASX listing of Dick Smith, as well as the time of year, just following the Christmas period,” he said.
However, Mr Hayes said time would be needed to determine the real causes of such a rapid demise, and that the significant turnaround in the retailer’s financial position required a period of reflection and review.
It comes after receivers Ferrier Hodgson revealed 10 former Dick Smith managers and directors would be called to court to answer questions about the collapse of the company.
The Australian Financial Review reported that Anchorage Capital Partners’ Phillip Cave and Bill Wavish, who represented the private equity firm on the Dick Smith board until early last year, would be grilled on their roles.
Mr Cave, who had previously strenuously denied allegations that Anchorage had pulled off a so-called “private equity heist”, said he would co-operate fully with the
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• The consumer electronics market is highly competitive with rapid changes in consumer demand patterns.
• DSG had a store network much larger than its competitors, and so a higher cost base, with considerable exposure to and reliance on the fast moving office/computer products market.
• DSG was losing market share by experiencing declining comparable sales. Revenue growth was based on store growth and commercial sales at low margins.
• DSG’s expansion plan required considerable financial commitment, utilised all cash resources, required considerable supplier commitment and required bank borrowings.
• Inventory decisions made in this environment were not consistent with consumer demand, and DSG was ultimately left with a considerable level of obsolete and inactive stock, requiring a major writedown.
• Clearance sales did not generate sufficient sales or margin to alleviate the cash pressure.
• Inability to obtain favourable credit terms impacted on stock levels, product mix and store presentation.
• Cashflow pressures led to banking covenants being breached that could not be

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