Dick Smith: Which Executive Quit In Disgust At Practises & Bags Of Cash From Brands?
Former Dick Smith buyers are up in arms after legal Counsel at the NSW Supreme Court hearing suggested that they were out of control back in 2014 when millions of dollars’ worth of obsolete stock was being ordered.
They claim that they were acting to instruction from senior management.
ChannelNews has been told that one senior executive Rod Orrock who is now the CEO of Best & Less left the Company because he was “Disgusted” with the business practises at the mass retailer who went broke owing suppliers over $400M.
According to one buyer Orrock approached him claiming that “If you are smart you should get out of this place”.
Rod Orrick has at this stage not commented on why he walked out on the mass retailer.
The Court has heard that O&A (Over and After) rebates had” become a drug” at the former Woolworths owned retailer.
Executives of the Company have been accused of using O&A payments had become critical to the Company with pressure placed on brands to hand over money to meet its profit projections”.
ChannelNews has been told but has not been able to substantiate claims that some Asian suppliers arrived at the Companies offices with bags packed with cash.
Evidence presented in the Equity Division of the NSW Court suggested that Dick Smith had more than 16 weeks cover of some private label stock from China, when 10 weeks is industry best practice.
Spreadsheets showed overstock in some areas, particularly in the Home Solutions category, of as much as 333 per cent – translating to 112 weeks of stock, or more than two years.
Barristers for the company at hearings in the NSW Supreme Court claimed that former CEO Nick Abboud and CFO Michael Potts did not implement buying practices that prioritised O&A (over and above) rebates over customer demand and the ability to sell stock at a profit.
The court heard that O&A rebates were seen by the company as a revenue stream, with rebate-driven buying practices resulting in the DSE group acquiring and accumulating “bad stock” – stock purchased from vendors that supplied O&A and with little to no customer demand – from at least May 2014, causing the retailer to lose money.
Barristers for CEO Nick Aboud maintain that the bad stock issue was not why Dick Smith went bust, and that the company remained profitable until the end – instead, they say that banks found a payment from the retailer to Macquarie Bank to be in breach of extension agreements, leading the company to be placed into administration due to “the banks’ intransigence”.