Growing pains

Dick SmithElectronics retailer expects to have up to 400 stores by the end of this financial year with nine further sites confirmed for this half year.

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Dick Smith has set a target of around 450 stores by the end of the 2017 financial year across three retail formats designed to attract new consumer demographics and to boost sales from the existing customer base.

There are currently 385 stores after opening 11 in the first half, including three under the new Move concept, as well as the closure of three underperforming Dick Smith outlets.

As well as the nine confirmed new outlets, five Move by Dick Smith locations opened at Sydney Airport this week.

Nick Aboud, Dick Smith CEO, says that some stores may be closed where “rent dynamics aren’t conducive” but the chain remains in an expansionary mood.

New store openings and contributions from the 21 Dick Smith, four Move, and 29 David Jones concession stores fuelled sales growth of 8.9 per cent for Dick Smith for the six months to December 28, 2014.

Sales were $693.8 million for the half, with comparable sales in Australia up four per cent but down 12.7 per cent in New Zealand where consumer sentiment has crashed.

Costs associated with the rollout of new stores, supply chain, and online investment and the downturn in trading in NZ along with competition in the Australian market pegged net earnings growth to just 0.8 per cent despite the 8.9 per cent sales increase.

Earnings lifted to $25.2 million in the first half of the current financial year, barely up from the $25 million posted in 2014.

Aboud is bullish about the current half year, with sales increases currently running in double digits, including a 17 per cent increase in January and like for like sales growth now topping three per cent, despite the drag from the NZ store network.

Aboud believes the company’s growth strategy, which anticipates a further 20 new store openings in the 2016 financial year, will deliver strong sales and earnings gains over the next 18 months.

“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 by the market.

“We have increased brand awareness of Dick Smith and improved customer price perceptions of the brand, lifting online sales to more than seven per cent of total retail sales in the latest half and expanding private label sales as well as offering the premium Move brand in all stores.”

Aboud said Dick Smith’s private label range currently represents 12 per cent of total sales with plans to lift that ratio to 15 per cent within two years after establishing the quality, aesthetics, and pricepoints of the range.

The private label range, driven in large measure by the development of the Move premium brand, expanded by 40 per cent in the past year.

Aboud said Dick Smith is currently outpacing JB Hi-Fi and has gained marketshare in an increasingly competitive environment with a higher level of promotional activity than last year.

A standout result was a 20 per cent increase in comparable sales for the David Jones concession stores.

Dick Smith’s online sales have been underpinned by a click and collect model in all stores as well as an online fulfilment system that delivers product from 124 locations.

This story first appeared in Inside Retail PREMIUM issue 2034. To subscribe, click here.

Dick Smith, Nick Aboud

Nick Aboud, Dick Smith CEO

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