30/09/2014 11:06 PMDick Smith driving growth with store openings, online and private label salesDick Smith has outlined its priorities in an investor presentation, highlighting plans to open more stores and increase the overall percentage of sales from online and its private label products.The presentation notes from the Goldman Sachs Conference state that 53 new stores will be opened in FY14 bringing the total number of Dick Smith stores to around 400 by FY15 across Australia and New Zealand.So far this financial year, Dick Smith has opened 16 new Dick Smith stores (there are 278 in total), four new Move ‘fashtronics’ stores and 31 David Jones Electronics Powered by Dick Smith stores, however two have closed meaning  there are 29 in total.Currently the company has a total of 311 stores in Australia and 61 in New Zealand. It plans to bring that number to about 400 by FY15 and potentially 450 beyond that.Some of these numbers will be made up by expanding Move, with the company stating there is potential to open up to 30 stores. Dick Smith anticipates that Move, which targets young affluent females and males, will generate around $2 million in annual store sales from a 160m2 trading footprint this financial year.Dick Smith is also focusing on its private label products. Currently private labels make up 11 per cent of sales, and with new ranging decisions this is forecast to grow to 15 per cent over three years.Online sales make up 5 per cent of Dick Smith’s sales, this figure is expected to grow to 10 per cent over the next three years.

30/09/2014 11:06 PMTransaction BackgroundDick Smith had been owned by Woolworths since the early 1980’s, until early in 2012 when Woolworths announced the business was non-core and underperforming and commenced a sale process.  After a period of exclusivity, in November 2012 Anchorage acquired the business for $20 million.  Business overviewDick Smith is the largest consumer electronics chain in Australia and New Zealand by number of stores, with approximately 369 stores in December 2013.  Dick Smith sells a wide range of consumer electronics products, including computers, printers, tablets, mobile phone handsets and connection plans, televisions, DVD players, audio products, and numerous related accessories and services.  The business sells primarily through its physical store network, and also operates an award-winning website providing the full range of Dick Smith products and services.  Forecast revenues for the year ending 30 June 2014 are approximately $1.2B.  Turnaround programFollowing the acquisition Anchorage introduced a new CEO, Nick Abboud, and further strengthened the existing management team with several new additions. In partnership with Anchorage, this management team immediately began implementing a highly successful program of operational, strategic, customer and cultural initiatives across all areas of the value chain. The major initiatives are listed below:Stores and staff: KPI dashboards rolled out to all stores linked to staff incentives, implementation of a “Serve Forward” in-store staff training program, improved recruiting policies and rostering processesSuppliers and buying: Developed strategic relationships with key suppliers and renegotiated agreements, opened a Hong Kong sourcing office for private label productsMarketing: New marketing program in collaboration with suppliers; “Dick Live Daily Deals” television advertisements launchedInventory and supply chain: Significant clearance of old and obsolete stock; improved stock management and ordering practices; optimised freight movement including closure of two distribution centres

Other: Migrated website to a new digital platform allowing greater flexibility, functionality, efficiency and customer experience; renegotiated all key contracts and procurement agreements

30/09/2014 11:06 PMDick Smith profit beats forecast as investor heads for exitDick Smith will ratchet up its private label offering by as much as 40 per cent this year by introducing new product lines and launching electronic categories, such as security cameras, tablets and audio accessories, as it prepares to farewell its private equity owner, Anchorage Capital, which is looking to sell down its stake in the business.The home entertainment and electronics retailer is expecting to launch private label goods under its home brand in the lead-up to Christmas, forming a key plank of its next phase of growth, which will also tie-in an aggressive store roll out program, more advertising and a greater penetration by its online channel into group sales.The strategies, plus a bounce in retail conditions since the federal budget, would help Dick Smith hit as much as 2 per cent same-store sales growth for the first half of 2015 with costs to be kept in check to help also lift profitability, managing director Nick Abboud said.

Launching private label goods: Total sales grew 4.2 per cent to $1.23 billion, 0.1 per cent ahead of prospectus. Photo: Glenn HuntDick Smith had witnessed a good start to the new financial year, Mr Abboud added, with like for like sales up 1.8 per cent and total sales growth in the low double-digit range.On Monday, Dick Smith reported its maiden full-year profit as a listed company, which came in as a net profit after tax of $42.1 million for the year to June 2014 – 5.3 per cent ahead of its prospectus forecast.The result coincided with a statement by its major private equity investor Anchorage Capital, which signalled it was looking for a buyer for its 20 per cent stake. Anchorage bought the struggling Dick Smith from Woolworths for just under $100 million in 2012 and floated it in December in a $520 million float.The private equity group said it had no intention of selling at current prices but Mr Abboud confirmed the stake would eventually be sold with the private equity firm not a long-term holder of the stock. The stake is currently worth about $103 million.

"They have put their intention out there and, if you look at their business model, they [Anchorage] are not into holding shares for the long term," Mr Abboud said.Mr Abboud and his management team still own 13 per cent of Dick Smith. He said Dick Smith, pushed by 20 new store openings and receptive shoppers, would be the fastest-growing retailer in the discretionary space. For fiscal 2014, Dick Smith beat prospectus forecasts by 0.1 per cent and was up 4.2 per cent to $1.227 billion. Mr Abboud said strong sales growth momentum recorded through 2014 had spilled into 2015, promising a strong first half. He said Dick Smith would open a new store every two weeks between now and Christmas, expanding its current network of 377 stores as well as opening a new outlet in David Jones as part of its partnership with the department store."The strength and quality of the result is testimony to the successful and significant transformation the Dick Smith business has undertaken during the past 18 months," Mr Abboud said.The company declared a dividend of 8¢ per share for the seven months to June 2014, representing a payout ratio of 66 per cent.

Want to develop its home brand/ replace gradually all the other products in its store – Move & Tandy

30/09/2014 11:06 PMFrom transistors to transition: Inside the new Dick SmithBy Claire Reilly-10,000 SKUs by Christmas, both high-end and lower-spec products-Dedicated areas for premium brands, 'store-in-store' concept spaces-400 stores within 3 years, focusing on high traffic locations-Sale of private label products expected to doubleThe new Dick Smith has arrived. After 8 months in the business, the successful buy out from Woolworths and the opening of a new retail store in Sydney, the newly-minted CEO of Dick Smith, Nick Abboud, has finally broken his silence on his plans for one of Australia’s most famous retail brands.At the opening of the retailer’s new “flagship” store in Sydney’s Pitt Street Mall last night, Abboud spoke candidly about Dick Smith’s transformation in the retail space. He spoke about the path taken by Anchorage Capital Partners (Dick Smith’s new owner) to turn around a business that was deemed “underperforming” by its previous owner, as well as his hopes for the future of a brand with a 44-year legacy and 323 stores across Australia and New Zealand.After buying the brand, Abboud admitted that Dick Smith’s new management had to “get the house in order” before it was ready to reveal a roadmap for the business. But last night, the new CEO was ready to open the doors.“I describe it as a house of brands,” said Abboud. “Whether you’re buying a computer, a tablet or the latest television, Dick Smith has all the brands you want in one location.“We’ve talked to our consumers about how they shop in this category and we’ve also looked at our own internal DNA. Dick Smith…has always been famous for computing, mobility and accessories. So as you walk through, you’ll see the dominance in those categories in range and price. And especially in the accessories category, you’ll see a lot of colour and fashionability to go with the product.”

That focus on colour and fashion is clear in the lower price-point products, with branded headphones, portable speakers and colourful smartphone and tablet cases scattered through the store. Dick Smith also has plans to introduce “lower spec” accessories under the Tandy brand and, from September, the retailer will also be moving into the post-paid mobile phone space.Although accessories and fast-moving products are a focus, the retailer has also included 'store-within-a-store' concept spaces from the likes of Samsung and Sony, with the goal of bringing a premium feel to the retail space.As a ‘house of brands’, Abboud said Dick Smith was not just focusing on international names but also its own eponymous private brand, which he said accounted for 10 to 12 per cent of the retailer’s turnover. In a move that will no doubt affect the ranging of product from other suppliers, Abboud said the retailer wanted to increase the presence of Dick Smith’s private label over the coming years.“It’s important to be proud of our brand and we want to move our brand up to 15 to 20 per cent over the next 5 years,” he said. “We’ve just opened up a sourcing office in Hong Kong where we procure that brand — all that has happened in the last 7 months — and we’ll bring in about $150 million worth of product through that sourcing office.”By comparison, Dick Smith currently buys $1.1 billion worth of stock from its partners, according to figures cited by Abboud.Along with growing the Dick Smith private label, the retailer is hoping to increase its clout in the gaming category, hiring a former buyer from EB Games to guide them in this space, and to increase its “share of voice” with a targeted marketing campaign.“We spend millions on marketing every year,” said Abboud. “We’ve restructured our whole media campaign and you’ll see evidence of that as we launch a catalogue to 6 million customers every week. There is not an electronics retailer that is focused on mobility, computing and accessories that is doing that today every week.”

With strong marketing targets and the expansion of product range (including a goal of “10,000 SKUs by Christmas”) Dick Smith also has plans to grow to 400 stores over the next three years. The company has signed off on seven leases with Westfield, all of which are set to open by March 2014, and Anchorage Capital Partners has committed “a large percentage” of its capital to new stores, with a road map of “20 to 25 stores a year”.“We believe we can get the best return through the growth of new stores and we can fractionalise our costs at the same time,” said Abboud. “All stores are profitable, which is great. Woolworths did a very good job of closing the 80 that were unprofitable.“We were very fortunate to pick up a store fleet that has investment already across 75 per cent of the footprint. As we open stores to get over 400, [the Sydney store layout] is the look and feel that you will see, and then we will pick select stores that we will refurbish going forward.”Those new openings are planned for “high traffic” locations as well as more premium spaces such as those occupied by the likes of Apple’s higher-end stores.“We’ve got a number of stores located near food courts, and they’re our best trading stores because of the foot traffic. If you come down here at 12 o’clock, I don’t think there are more people you could fit into one location. So we will look at high traffic locations, but we’ll also find that Apple type location as well.”The doors are opening on a new 600-square-metre store in Melbourne’s Chadstone shopping centre within the month, as well as other “A Centre” locations such as Westfield Southlands in Cheltenham, Victoria. There is also a store in the works for the Emporium shopping centre, set to open in March on the site of the old Myer building on Lonsdale and Little Bourke Streets in Melbourne. Alongside these shopfronts, Dick Smith will still focus on its footprint in regional towns, which Abboud said were “some of our most profitable stores”.Though Abboud admitted there had been confusion in the past about just what Dick Smith could offer consumers, he said the retailer had a clear strategy moving forward.

“We want to be famous for computing, mobility and accessories, and to compete on entertainment. That’s our strategy. While we want to compete in the entry price point in accessories and things like a $399 computer, we’ve also got Ultrabooks at $1,200 in this store.“We’re going to be very focused on the categories that we’re good at. We want to be innovative and we want to bring the products first to market. Will I get back to transistors? Probably not. Though when you look at the Apple accessories and Samsung accessories on the wall, that’s our new transistor for today’s market.”

Dick Smith CEO Nick Abboud at last night's store opening.Click here to see inside Dick Smith's new Sydney CBD store.

30/09/2014 11:06 PM