Dick Smith’s soft sales have disappointed investors but the electronics retailer expects new stores, kitchen appliances and fitness gadgets to drive growth in the year ahead.
Total sales were up 7.5 per cent to $1.3 billion in 2014/15, but comparable sales grew only one per cent.
This is weaker than rival JB Hi-Fi which reported last week comparable sales growth of nearly three per cent.
Dick Smith’s Australian same store sales grew 2.4 per cent in the 12 months to June 28, while its New Zealand sales declined 6.9 per cent due to aggressive pricing from rivals and a deterioration in consumer sentiment, the company said.
The results did not impress investors, with the stock tumbling more than 16 per cent to its lowest share price since it listed two years ago.
JB Hi-Fi attributed Treasurer Joe Hockey’s $20,000 instant asset write-offs for small businesses as playing a large part in its sales growth.
Dick Smith chief executive Nick Abboud said unlike JB Hi-Fi, the retailer didn’t benefit from the federal government’s small business tax incentives.
“Our business is structured differently in that we have a very small commercial business (customer base), which is very different to our competitor,” he said.
The soft like-for-like sales growth and weaker earnings per share were behind Dick Smith’s share price fall, Morningstar analyst Farina Parsons said.
“One per cent is pretty soft and it is a similar business to JB Hi-Fi which had a stronger like-for-like sales growth,” she said.
However, Dick Smith expects new store openings, its rollout of small appliances and its private label products to lift profit by between four and 11 per cent to $45 million to $48 million in the year ahead.
Coffee machines and juicers are driving the retailer’s kitchen appliance sales, but its fastest growth category is fitness wearables, including smartwatches.
The company has also stopped discounting iPhones as aggressively as it had in the past.
“There will be less promotional (prices) for some of the big brands because we don’t need to drive a lower margin; we are getting natural foot traffic,” Mr Abboud said.
The retailer’s online sales have grown to eight per cent of revenue, from two per cent two years ago, with TVs and computers its most popular items.
The company has nearly 400 stores across Australia and New Zealand after opening 70 new stores in 2014/15, including six in its new tech accessories chain MOVE.
It plans to open up to 20 new stores a year.
Dick Smith shares closed down 33 cents, or 16.5 per cent, at $1.67.
DICK SMITH DISAPPOINTS INVESTORS
* Net profit up 91pct to $37.9m
* Underlying net profit up 3pct to $43.4m
* Revenue up 7.5pct to $1.32b
* Fully franked final dividend down three cents to five cents