Retail downturn bites Dick Smith and Harvey Norman

Retail downturn bites Dick Smith and Harvey Norman

Tough economic conditions and dollar strength see figures slide

Retail giants Harvey Norman and Dick Smith have announced half-yearly results reflecting the impact of touch economic conditions and the strength of the Australian dollar.

Significant price deflation in consumer electronics products and requirements for strong price investment has negatively impacted the consumer electronics (CE) division for retail giant, Woolworths. And Harvey Norman has announced a substantial drop in before-tax profit, attributable to the tough economic conditions and the strong dollar..

Despite recording a 2.3 per cent increase in sales to $726 million for the first half of the 2011 financial year, earnings before tax took a 42.2 per cent slide to $20 million in Woolworths' CE unit, in comparison to the same period last year.

“The impact of these factors was exacerbated by the transitioning of our network of stores, as we continue to reposition the Dick Smith business,” Woolworths said in a statement to the ASX.

“We are confident in our new format stores as they have strong customer acceptance and are performing relatively better in terms of sales and EBIT.”

Some of the key initiatives Woolworths highlighted for the rest of the financial year include the rollout of new format stores, investing in staff, online, and an increased focus on the computer category.

“New e-learning courses on technical product information are increasing our sales staff’s confidence and ability to sell the latest technology to customers,” the company said. “As a result, by leveraging our staff knowledge, we have experienced strong market share growth in this category [computers].”

Across A/NZ there are 186 new format Dick Smith stores, which have experienced a 16 per cent increase in sales. The retail giant expects to convert the rest of the Dick Smith outlets to the new format by the end of the financial year.

During the first half of FY11, 27 Dick Smith stores were opened, and 25 Dick Smith and 10 Tandy stores were shut down. Five Tandy stores were rebranded as Dick Smith. There are 337 stores across the country.

Harvey Norman has announced for the half-year ended December 31, profit before tax was $198.61 million, down 16.5 per cent on the previous year’s figure of $237.77 million.

In a release to the ASX, the retailer claimed the conditions for the half year had been negatively affected by a decline in consume confidence following interest rate increases, a cool, wet summer reducing demand for products such as cooling and outdoor furniture, and significant price deflation on TV and laptop computers compounded by the strength of the Australian dollar.

Despite this, the Harvey Norman board maintains a positive outlook for the retail chain going forward.

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Tags retailconsumer electronicsHarvey Normanwoolworthsdick smithtandy


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