25th Feb 2016
The founder of Dick Smith electronics says greed caused the business’ downfall, as stores across Australia and New Zealand prepare to close over the next eight weeks.
- Closures will result in loss of 2,460 staff in Australia, 430 in New Zealand
- Receivers did not receive any “acceptable” buyer offers
- Employee entitlements expected to be paid in full
The company was forced to announce the closures after its receivers were unable to find a suitable buyer for the company.
The remaining 301 stores in Australia and 62 in New Zealand will close, resulting in the loss of 2,460 staff in Australia, and 430 in New Zealand.
In a statement to the Australian Securities Exchange, receivers Ferrier Hodgson said it was a disappointing outcome.
“While we received a significant number of expressions of interest from local and overseas parties, unfortunately the sale process has not resulted in any acceptable offers for the group as a whole or for Australia or New Zealand as standalone businesses,” receiver James Stewart said.
“The offers were either significantly below liquidation values or highly conditional or both.”
The receivers said all Australian employee entitlements would rank as priority and are expected to be paid in full.
The chickens come home to roost and now lots of people have lost money and lots of staff have lost jobsFounder Dick Smith
Dick Smith founded the company nearly 50 years ago but sold it in the 1980s to Woolworths, who sold it to the private equity firm Achorage Capital Partners in 2012.
“When it was changed to a consumer electronics business it probably could remain viable with 100 shops,” he said.
“But when you have the utter greed of modern capitalism, when they opened 300 shops, basically the writing was on the wall — it’s going to go broke.
“It’s this ridiculous formula we have that we have to have perpetual growth when it’s impossible.”
Mr Smith said he was angry and disappointed that it was closing — laying the blame at the feet of the owners.
“It was taken over by Anchorage Capital who paid $90 million for it which was probably what it was worth and then they floated it 18 months later for $500 million,” he said.
“Now anyone would know that’s impossible.
“The chickens come home to roost and now lots of people have lost money and lots of staff have lost jobs.”
Dick Smith ‘did not fit into retail landscape’
Forager Funds Management chief investment officer Steve Johnson told the ABC it was a terrible time for those who worked to turn the situation around.
“There was some hope, but when you go into receivership you have a matter of weeks to sell the business,” he said.
“The longer this went on the more likely [you are] to see a liquidation rather than a sale.”
He said there were offers from buyers but they were far below what the receivers thought they could get from liquidation.
Mr Johnson said the closure was an indication of the tough market, and that the brand did not belong.
“The Dick Smith business does not fit into the Australian retail landscape, it’s been in decline for a long time,” he said.
Mr Johnson said there were businesses going bust “all over the place” but because this was a recognised brand name, it gained more attention.
Last month the electronics retailer went into receivership after sales and cash generation were below expectations in the key December trading period.
Dick Smith said at the time the directors were unable to secure support from the company’s bankers to provide finance for restocking to see it through the next month to six weeks.
That prompted them to appoint McGrathNicol as administrators to run the firm while restructuring or sale options were explored.
However, after the appointment of administrators, Dick Smith’s lenders appointed receivers, Ferrier Hodgson, to run the firm and protect their financial interests.
Earlier this month the Fair Work Ombudsman launched an investigation after evidence emerged the failed chain might have underpaid its employees.
Ferrier Hodgson discovered the discrepancies, worth as much as $2 million.