Dick Smith Store Revenues Slump, Creditors Meeting Delayed
Administrators to the failed Dick Smith Chain have moved to delay the next creditors meeting until August 2.
A none binding information memorandum relating to the sale of Dick Smith assets, was released earlier this week, offers have to be in by January 27.
The receivers claim that have attracted more than 30 expressions of interest to buy some or all of Dick Smith’s assets.
However, ChannelNews has also been told that of the offers already received several are “extremely low ball” offers of less than $25M.
Earlier today recievers Fewrrier Hodgson said that Dick Smith will close its network of outlets in David Jones department stores as the company’s receivers try to find a buyer for the failed retailer.
Ferrier Hodgson said that the 27 concession stores located in David Jones stores (known as David Jones Electronics Powered by Dick Smith) would be closed.
In a statement the receivers – James Stewart, Jim Sarantinos and Ryan Eagle – said the closure would affect 181 jobs, mostly part-time and casual.
The receivers are in the middle of an attempted sale of Dick Smith after it went into administration in early January. An information memorandum has recently gone to potential buyers.
“The receivers have been undertaking an ongoing review of the operations of the group with a view to maintaining stable operations in order to facilitate its sale as an ongoing concern,” they said in a statement.”As a result of this review, the receivers have determined that they will no longer continue to operate the 27 David Jones Electronics Powered by Dick Smith concession stores, contained within David Jones department stores.
Several Dick Smith store managers who have contacted ChannelNews said that “very few” customers are visiting Dick Smith stores and those that do are walking out with no purchases.
Recently existing stores were instructed to lift the price of Dick Smith and Move branded house products a move that some managers claim has seen a $5 cable suddenly priced at $25.
Install the receivers had targeted to generate $18M a week by keeping the stores open according to sources, however revenues have slumped to sub $8M with the real possibility emerging that stores could be closed down and existing staff retrenched.
Dick Smith’s administrators confirmed to Fairfax Media that they intended to file a court application within the next week seeking orders to extend the period of time to convene the second meetings of creditors up to August 2.
The administrators – Joseph Hayes, Jason Preston, Jamie Harris and Matt Caddy of McGrathNicol – flagged the postponement at the first creditors meeting last week but did not indicate the length of the proposed postponement.
ChannelNews has also been told that several organisations who were initially interested in the Dick Smith New Zealand operation are now walking away from the prospect of buying the NZ stores, after it was revealed that operating costs associated with the NZ group were being picked up by the Australian operation in an effort to make the business look profitable in New Zealand.
A spokesman for McGrathNicol said the postponement would give the administrators more time to assess numerous creditors’ claims and to stabilise Dick Smith’s operations.
Dick Smith called in McGrathNicol as voluntary administrators and a syndicate of lenders appointed Ferrier Hodgson as receivers on January 4 after lenders withdrew their support in the wake of slumping sales and rising debts.
Secured creditors, including HSBC and National Australia Bank, have staked claim to about $140 million while unsecured creditors including Macquarie Group are owed about $250 million.
Shareholders, whose shares were valued at $84 million at the time of the collapse, will only be repaid if Ferrier Hodgson can find buyers to stump up more than $400 million for Dick Smith’s assets, including its standalone chain Move and the New Zealand business.