Dick Smith (DSH) shares were slumped more than 17% at one stage yesterday as the retailer turned in an unconvincing performance for the year to June 30.
The company is the third force in consumer electronics business behind JB Hi Fi and Harvey Norman was held back by the weaker NZ dollar and the general retail malaise across the Tasman, especially in the closing months of the year.
On top of that Dick Smith seems to have missed out on the budget stimulus for small business from the tax write-off.
The company told the ASX yesterday that while it had enjoyed a “strong Australian performance” with topline sales up 10% and same store sales up 2.4%, with a 22% jump in earnings before interest, tax, depreciation and amortisation, the group could only manage a 7.5% rise in topline sales, a 1% rise in same store sales and EBITDA growth of 7.3%.
The NZ operations saw a 6.9% fall in sales and negative same store sales growth, thanks to weak consumer sentiment (that’s despite the solid, faster economic growth across than Tasman than in Australia).
The shares fell 1.5% to $1.665 (and touched a 52 week low of $1.65 during trading), mostly on a result 10% lower at $37.9 million after the retailer booked $5.5 million in one-off costs mainly associated with 80 job cuts earlier this year.
And while the company expects another year of growth in 2016, forecasting underlying net profits between $45 million and $48 million (in line with market forecasts around $47 million), the quality of the overall result fell short of expectations.
DSH 1Y – Dick Smith disappoints
So while Dick Smith reported a net profit after tax of $37.9 million for the 2015 financial year thanks to the job cut costs, underlying net profit of $43.4 million, was only up 3.1% from $42.1 million in 2014. And earnings before tax were $79.8 million in 2015, up 7.3% from $74.4 million in 2014.
That was despite Dick Smith opening 25 new stores last year, bringing it to a total of 393 across Australia and New Zealand, including four duty free stores at Sydney International Airport.
And even though Dick Smith management told analysts yesterday that the situation in NZ was “improving” the reality is that with a sharp fall in dairy incomes happening (NZ’s biggest export) and the continuing property boom in Auckland unbalancing the economy (and despite falling interest rates), NZ trading might not see any great improvement in the coming year.
The company’s private label products also sold well, accounting for over 12.5% of total sales, with plans afoot to increase its private label range by 40%.
Dick Smith and rival JB Hi-Fi plan to take a slice of Australia’s $1.7 billion small appliance market, and Dick Smith says it will roll out kitchen appliances, coffee machines, vacuum cleaners and irons to 100 of its stores within the next year.
In an outlook update, management said:
"Dick Smith achieved July sales growth of 6% for total sales and 0.1% for comparative sales, reflecting the sales performance a year ago and a weaker New Zealand Dollar. Australian comparable (same store) sales grew over 1%.
"Management is confident its previously outlined strategic growth initiatives will deliver further profit improvement in FY2016, including from the opening of 15 to 20 new stores (of which 15 are confirmed), the introduction of small appliances in 100 Dick Smith stores and the completion of the cost base restructure, which will deliver further CODB benefits in FY2016.
"Also influencing the outlook are macro- economic conditions, such as the potential impact of consumer sentiment, a softer New Zealand market and currency movements, which remain volatile.
"Reflecting this potential impact and the performance expected from the Company’s growth initiatives, 2016 NPAT is likely to be between $45 million and $48 million. A further update will be provided at the Company’s AGM in October,” directors added.
Total dividend for the year was 12 cents a share with a final of 5 cents. That was up on the 8 cents a share proforma payout for 2013-14 when the company was listed on the ASX.
