The Dick Smith Soap Opera had a new act yesterday when the former Chairman was grilled in the NSW Supreme Court as to why the failed retailer chose to stock 80 different camera models.
Former Dick Smith chairman Phillip Cave whose Company Anchorage Capital pocketed over $500M despite the retailer collapsing with debts of over $400M was asked to explain what happened at the mass retailer while he was Chairman of the failed Company.
He told the Supreme Court examination into the collapse of the iconic company that the board “felt there were too many products in the business”.
Cave said the retailer at one stage had about 45 different mice for laptops and personal computers.
When questioned about the high level of excess stock carried by the company such as 80 different cameras he said that the strategy was based on a “good, a better and a best” option”.
“We minimised our stock into a good, better and best area,” Mr Cave said.
Phil Cave Left, Former Chairman of Dick Smith, former CEO Nick Aboud right.
“That doesn’t mean only three products but you minimise.”
“We got it down to about three,” Mr Cave said.
When ChannelNews exclusively revealed that the Company was carrying three years + supply of batteries the Company refused to comment.
Now the NSW Supreme Court has heard that during 2015 Dick Smith had 141 months’ supply of Dick Smith branded AA batteries – enough for 12 years – and 131 months’ supply of Dick Smith AAA batteries.
Mr Cave said the board was comforted the management team, chief executive Nick Abboud and chief financial officer Michael Potts, had a “proven track record” of reducing stock.
“When did they manage to reduce stock well?” said counsel for the receivers, Jeremy Giles, SC.
To be $100 million out is not good.
Mr Cave said that when Anchorage bought Dick Smith in 2012 it had about $370 million of stock which was reduced to $172 million over the next seven months before it rose again.
The court has previously heard there was a “spike” in company inventory in late 2014 and early 2015, when the value of the stock peaked around $350 million.
Mr Cave told the court the “magic number” for inventory was about $250 million, allowing for an increase around Christmas.
“To be $100 million out is not good,” Mr Cave said.
He said management committed in 2015 to get the figure down to about $270 million.
Mr Cave said the board intended to open more bricks and mortar stores and the “magic number” was 400.
The court has heard the company had about 330 stores in 2015 but only carried out 62 stocktakes.
“When we bought the business we actually brought in a new software business to improve the quality of stocktakes,” Mr Cave said.
He said it allowed the company to do “less and less stocktakes” in stores.
