How Dick Smith Management ‘Screwed’ Suppliers
The shocking way that Dick Smith management treated suppliers is slowly being revealed in the NSW Supreme Court.
From being the source to make “bucket loads of money” to being the means by which Dick Smith management could inflate profits, supplier relationships are front and centre in a discovery hearing that has heard how both directors and management conspired to strip as much money as they could from their trading partners to the extent that suppliers such as Panasonic refused to do business with Dick Smith management who were led by the likes of former CEO Nick Aboud and Marketing Director Neil Merola.
John Skellern, former Dick Smith Supply Chain boss said it was part of the company’s strategy to ask suppliers for a “bucket of money” to support the retailer so it could promote the stock.
Then in another twist of the knife Dick Smith management then delayed payments or asked for extended credit terms from suppliers.
“The idea is if we got extra stock, we had to get extended payment on that stock, which is 101 law of retail,” Mr Skellern said.
Skellern admitted by 2015 some suppliers were refusing to supply stocks to Dick Smith although he could not recall who those suppliers were.
He said it was common in the retail industry for vendors to give support. When asked why a particular type of suppliers give money to Dick Smith, Mr Skellern said: “That’s what suppliers do.”
Former chief executive Nick Abboud, former CFO Michael Potts and chairman Phil Cave will give evidence when the examination resumes in October.
In the latest hearing into what is now becoming a Soap Opera, the Court heard that management spent over $100 million on stock purchase without asking for board approval. A great deal of that stock failed to sell through resulting in the retailer collapsing with debts of over $400M.
Former non-executive director Robert Ishak when asked about the actions of former CEO Nick Aboud said
“[Chief executive Nick] Abboud expressed he was the retailer on the board and he knew that it was a good buy and he knew he could sell it,”.
When asked about the company’s policy on maximising vendor rebates, Mr Ishak said the company had already been pursuing a strategy to maximise rebates when he joined the board in October 2013.
“It was always the policy to maximise rebates,” Mr Ishak said.
He said he had no concern about paying dividends to shareholders in the 2015 financial year and he did not think it would prevent the company from paying back its creditors.
“I recall receiving a payment forecast and nothing there raised my concerns,” he said.