Home > Industry > Dick Smith Court Case > LIVE Coverage: Stock Levels A Big Issue At Dick Smith Because Of O/A Demands

LIVE Coverage: Stock Levels A Big Issue At Dick Smith Because Of O/A Demands

Nick Abboud the former CEO of Dick Smith has been grilled today in the NSW Supreme Court over the alleged bullying of buyers to drum up millions of dollars in questionable O&A payments.

Dick Smith was placed into liquidation in 2016 with debts of over $400M, shareholders have bought the action in the Supreme Court claiming that they were mislead over the profitability of the Company.

Abboud who claims the practice of Over and Above payments are still in place today at Harvey Norman, Officeworks and JB Hi Fi but has denied that the O&A payments were going direct to prop up Dick Smiths profits.

At one stage it was claimed that the former head of Merchandising “bullied buyers” when O&A targets were not met.

Abboud also denied that suppliers were told that unless they supplied O&A cash their products would not be ranged.

ChannelNews understands that at one stage Dick Smith had a white board which the O&A amounts were tallied on. One supplier in an email to ChannelNews has said that he was asked to supply $50,000 in cash.

Abboud said that brands such as Intel and Microsoft paid O&A payments relating to the sale of notebooks and PC’s as marketing payments.

He said that these Companies were today still paying retailers such as Officeworks, Harvey Norman and JB Hi Fi marketing dollars over and above the negotiated profit margin and rebate.

He said that that the money was used for marketing and to get the “front page” of Dick Smith catalogues, TV and Radio advertising.

It was suggested to him that this was not the case and that the payment was going to prop up the Companies profits.

When asked outright as to whether he was aware that John Skellern the former merchandising director who was responsible for managing the Dick Smith’s O&A collections bullied staff and often shouted at staff when the O&A payments did not meet targets Abboud said that he was not aware of “any formal complaint to HR”.

At one stage Deloitte the auditors to Dick Smith told Abboud that the practices and the way that O&A payments were being bookkept was wrong.

An email from Abboud on a Sunday in April 2014, to John Skellern, Neil Merola the former Marketing Manager, and Michael Sullivan that was also Cc: to Greg Hirsh, Carl Bonham, and Chris Borg claimed that gp (gross profit) had fallen short.

Abboud then claimed that the business needed $5.5M in O/A for April.

Abboud was shown a document from Deloitte that raised questions about the way that O/A payments were being treated on the books.

Abboud said that he had never seen the document

More to follow.

Click for LIVE Court feed.

Abboud was shown a document from Deloitte that raised questions about the way that O/A payments were being treated on the books.

 

Abboud said that he had never seen the document.

Abboud was then shown another document, it was suggested that he threatened to sack Deloitte unless they changed their view on the treatment of O/A payments.

 

Another email was then shown to Abboud relating to the treatment of O/A payments.

Abboud detailed the problems he faced when taking over DSE from Woolworths, including that the company had 320 stores (later expanded to 370), many of which had no stock.

He was hammered at the hearing on a stock buying spree, with stock levels increasing by $85m on June 30 2013, which lawyers said was to gain O&A rebates.

Abboud admitted that JB Hi-Fi had at the time been turning over three times the volume with only 170 stores. He attempted to justify stock purchases by saying it was not about O&A but about providing stock during the peak June end of financial year period.

It was put to him, however, that his explanations were “simply not true”, with an email shown about a contingency meeting to raise a $2 million shortfall in profit, including Greg Hirsch – head of merchandising for office and PC – needing to raise a combined $750,000 in O&A and ad subs from a $5 million OTB.

Abboud was shown an email from Potts which lawyers said suggested $47 million in stock had been purchased just for the O&A rebates.

He claimed that Dick Smith always had higher weeks cover, as it needed to keep a large number of stores in stock. In another email from John Skellern, however, Skellern told buyers to “purely focus on getting the most support you can from the order placed”, including O&A/marketing support.

Additionally, an email from Chris Borg showed that in August 2014, the company had $29 million in overstock of its top 100 SKUs with 20 weeks cover or more.

You may also like
Dick Smith LIVE: Former Chair Rob Murray Contemplated Sacking Abboud, Potts
Dick Smith LIVE: Former Myer Chairman Questioned Over Dick Smith Collapse
Dick Smith CEO Threatened To Dump Deloitte Over Questionable Payments
Dick Smith, Ongoing Court Case Coverage
Cheap As Chips Boss Nick Abboud Facing Take Over Offer