Is David Jones Set To Pull The Pin On Dick Smith, Some Say Yes?
ChannelNews has been told that Dick Smith is trying to renegotiate the extension of a three year contract with David Jones which is due to run out in October 2016 despite their being a three year option in the contract.
A key element of that contract that saw Dick Smith set up consumer electronic stores inside David Jones stores was a none compete clause that prevented Dick Smith from selling appliances which is a major category for the now Woolworths owned stores.
In an interview early week, David Jones chairman and Woolworths Holdings chief executive Ian Moir declined to comment on rumours that both sides wanted out.
Nick Aboud the CEO of Dick Smith has played down speculation that Dick Smith’s concession-style agreement with David Jones could come to an end before the initial three-year term comes up in October 2016.
“My meetings with David Jones have been about how we improve the business for both parties – that’s been the conversation I’ve had with them,” he said yesterday. “Over the next 12 months it’s about how we improve both businesses and we’ll look at it in a year’s time.” he told the Fairfax Media.
A senior David Jones executive told ChannelNews that the contract will not be renewed due to “Other strategies” currently being worked on by the department store.
Woolworths Holdings does not sell consumer electronics in South Africa and is believed to be keen to use the space currently occupied by Dick Smith in 29 of its 38 stores for other categories.
What is not known is whether David Jones will use their NARTA relationship to move back into selling selected consumer electronics.
The Financial Review said recently that Dick Smith was initially keen to tap into David Jones affluent A-B demographic and American Express customer, but is now generating stronger sales growth from its stand-alone and Move stores.
Under the deal, Dick Smith agreed to pay David Jones a fixed percentage of sales every month, and make a minimum payment each year regardless of sales volumes. The department store stood to make even more from the arrangement if Dick Smith’s sales grew.
Push could come to shove later this year, when David Jones sells its Market St store to developers. Market St houses the largest David Jones Powered by Dick Smith concession.