Woolworths to sell Dick Smith chain
Woolworths will sell its poorly performing Dick Smith Electronics retail chain to focus on its larger format businesses.
The company today announced the completion of a strategic review commenced last November which has concluded an orderly sale process is the best outcome for the parent company.
Since the announcement of the strategic review, Woolworths has received an unspecified number of unsolicited approaches in relation to the business and the company will now explore these and all other potential options to optimise shareholder value.
The company said it had also identified "up to 100" stores which were underperforming and it would "accelerate the rationalisation of the store network with a plan to close these "within the next two years".
Such a timeline is far longer than any sales process could reasonably be expected to take so it is unclear how many stores - if any - will actually be closed. Underlining that point is the commitment that no jobs would be lost with affected staff offered positions elsewhere within the Woolworths business.
Woolworths will take a $300 million restructuring provision in its first half year figures to cover the sale process.
CEO Grant O'Brien said the strategic review had concluded that Woolworths’ main strengths are primarily in larger format, multichannel, high volume retail segments with market?leading
positions. The future of the Dick Smith business, which was profitable and had a strong brand position, could be better realised through new ownership, he said.
The review also found:
- Consumer electronics will remain an important category for Woolworths and is better delivered through Big W and its expanding multichannel offer.
- The investment and management attention given to Dick Smith have been disproportionate relative to its position within the Woolworths group. The company’s
- current focus is on accelerating growth in its core trading divisions.
- Following further restructure, Dick Smith will be divested as a going concern to "an appropriate buyer" and will continue to operate as normal.
“Dick Smith is an iconic specialty consumer electronics brand, with a strong team and its own leading online presence," said O'Brien, whose role is to now talk up the value of the business to attract the highest bids it can.
"It has developed into a trusted technology retail and services hub, carrying world?leading brands and with strong market share in several key categories. However we believe that separating this speciality model from Woolworths is now the best option for the future of both businesses.
Business will continue as usual for Dick Smith, its customers, suppliers and staff, "building on the strong Christmas sales period,” he said.
“A divestment of Dick Smith will enable the Woolworths group to focus more investment on serving customers in its core business with a strong multichannel offer, backed with marketleading
fulfilment systems and an effective store network.”
Greenhill Caliburn has been appointed to advise on the divestment process with an objective to maximise shareholder value.
Prior to the announcement, Morningstar research Peter Warnes said "the best thing" O'Brien could do is cut Dick Smith.
"It's been a millstone for the company and is an absolute distraction."
There was considerable media coverage last week of an analyst report recommending Woolworths close about 200 of the 386 stores in its under-performing Dick Smith operation, which posted just $17.8 million profit last year.
Some media interpreted this as a leak of Woolworths’ intentions, but there was no evidence that was the case.
Read More at: Inside Retail 31/01/2012
