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Great article on the Dick Smith float and explains a lot about Dickies clearance sales.
https://foragerfunds.com/bristlemouth/dick-smith-is-the-grea…
Thoughts?
The Dick Smith Capital Heist
theworks on 30/10/2015 - 06:54
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Well played.
But did OzBargainers win too because of all their clearance sales?
Probably, but that has long since passed. They wrote down the value of their stock so that when it was sold at a loss it was more favourable on the forecasting reports which is completely unsustainable (so dont expect any more below cost bargains)
I noticed yesterday they had a 15% off coupon and it could be stacked on top of their selected laptops which are 15% off. But even then it was still more expensive than a similar laptop at MSY.
Different kettle of fish though. MSY trades volume/customer service for lower margins - so not really ideal for the typical demographic at Dickies.
@theworks: I get your point. I often choose to pay a bit more to avoid the MSY line. If I need to RMA something bought from MSY I go straight to the distributor, skipping the MSY shrug of indifference.
That said, have you dealt with Dick Smith? They make MSY look like customer service champions.
Good read. It will be interesting to see if DSE is able to recover now. I think they need better sales and less exclusions. Even though the Ozbargain community has been good to them with their various eBay sales over the past couple of years and their daily price reductions.
That's the main problem though, their sales are daily so you always expect it to go down the next day.
I think they need better sales and less exclusions.
They can't, that's one of the points of the article. The sales were to get rid of stock that they'd already devalued on the balance sheet - so it looked like a good strategy on paper at the time (which was the intention), but it was only to make things look rosy in the short term.
It's kind of like buying a car for $20k, then telling yourself that 3 months later it's only worth $5k so when you sell it for $10k you feel like you've done well (when in reality you haven't).
Their sales were too good to be true (too frequent, bigger markdowns than others). Great for consumers, but not a solid business strategy. Now investors are stuck with the problem.
One thing is for sure…the sales…they won't be happening again.
The problem is consumers have come to expect these sales from DSE now.
I think these sales will start happening again as this is the only way they will be able to turnaround the business.
DSE competes in a highly saturated market competing with Harvey Norman and JB HiFi who have had profit increases this year. DSE is clearly struggling and their continued dependence on debt highlights this.
I believe the firm was overvalued originally and the market is correcting it at long last. If DSE can't turn figures around in the next couple of years, there will be some great bargains to be had.
Only after the shareholders flip it to the next Equity Fund to rinse and repeat the same process to a new batch of investors.
The problem is consumers have come to expect these sales from DSE now.
The equity fund doesn't care, it's job is done. They've sold the lemon.
I think these sales will start happening again as this is the only way they will be able to turnaround the business.
You don't turnaround a business by selling at a loss. The only reason this worked was because it made the books look good in the extreme short term. The business was in bad shape, they were just using this strategy to put lipstick on the pig.
If DSE can't turn figures around in the next couple of years, there will be some great bargains to be had.
Yeah…liquidation sales…
@the-mal: How else should DSE turnaround their business then?
The firm has no competitive advantages over its competitors and can only really compete on price.
Most consumers only care about price at the end of the day. Even if the service at the store is great, if the prices are too high, people will just buy online or at another store.
DSE expanded through opening Move Stores which are not profitable and some are situated very close to regular DSE stores, saturating their own market.
Liquidation will happen in time if they don't overhaul the business. Will be interesting to see what they do.
I suspect the Move stores were a bit of a hail mary using the liquidity of the market as an attempt to diversify/corner a niche. Someone who gets paid a lot more than I do would have a better idea of how to save Dickies but the current road is rickety and will slowly lead the company off a cliff (if it hasn't reached that point already).
They should go back to selling capacitors and transistors.
No one would switch back from Jaycar now.
Wow. Typical equity fund take over.