Dick Smith in store decline

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#1462559 6-Jan-2016 18:47

st02197:
bmt: Couple of new articles out today. They were apparently "aggressively" promoting gift card sales at supermarkets in Aussie and offering a 10% bonus over the Christmas period:

http://www.smh.com.au/business/dick-smith-accused-of-pumping-up-gift-voucher-sales-20160105-gm0432.html?&utm_source=facebook&utm_medium=cpc&utm_campaign=social&eid=socialn%3Afac-14omn0012-optim-nnn%3Apaid-25062014-social_traffic-all-postprom-nnn-smh-o&campaign_code=nocode&promote_channel=social_facebook

And the banks waited until the company was cash rich from Christmas sales and before gift cards could be spent to put the company in receivership:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11569929

Poor form all round really.

Surely someone should go to jail for this? Promoting the sales of something that they had no intention of honouring? At the very least the senior management should have known about this and should be held accountable.

It's tough call to prove management had no intention of honouring - they probably did intend to honour as long as they could keep the banks at bay. But they couldn't. It was the banks that put the company into receivership, not DSE management, and the banks would not have given DSE advance warning of their move.

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#1462627 6-Jan-2016 20:15

I think that's probably a pretty succinct and accurate statement.

DSE's management have indicated they would continue to trade, and by all means it is evidently the banks which called in the receivers (and led to the administration). I don't think they intentionally sold gift cards intending not to honour them. Doesn't make it any less awful for the people stuck with gift cars they can't use.

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#1463641 6-Jan-2016 20:33

antonknee: I think that's probably a pretty succinct and accurate statement.

DSE's management have indicated they would continue to trade, and by all means it is evidently the banks which called in the receivers (and led to the administration). I don't think they intentionally sold gift cards intending not to honour them. Doesn't make it any less awful for the people stuck with gift cars they can't use.

And, as the NZ division is profitable, why cut those cards off?? Its one thing not being able to replace goods if they are broke, but to take cash for gift cards that can only be used there, and deposit on lay-bys, and pocket it? And continue to trade? Insolvency, yes, but they aren't in NZ, they are just taking gift cards at a 100% margin.

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#1464657 6-Jan-2016 21:05

Except the NZ subsidiary is just that - a subsidiary of DSH. The entire group is in receivership and administration.

Effectively the DSE that exists now is legally a different entity from the DSE that existed prior to the 4th/5th of January. They are not obligated to honour the gift cards etc as technically it wasn't them that issued them or took the money in the first place.

Profitable is a stretch. The NZ division's NPAT was $1.3 million on revenue of just under $180 million - not even 1%. The group carries a significant amount of interest bearing debt (approx $70 million). The NZ division holds $11 million of debt, payable to the Australian parent which is interest free. If the NZ subsidiary were paying its share of interest, it would wipe out all the profit. The profit isn't really there in that sense - they are using the debt to fund their operations. The banks who own that debt are the ones who called in the receivers.

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#1464659 6-Jan-2016 21:09

tdgeek:
antonknee: I think that's probably a pretty succinct and accurate statement.

DSE's management have indicated they would continue to trade, and by all means it is evidently the banks which called in the receivers (and led to the administration). I don't think they intentionally sold gift cards intending not to honour them. Doesn't make it any less awful for the people stuck with gift cars they can't use.

And, as the NZ division is profitable, why cut those cards off?? Its one thing not being able to replace goods if they are broke, but to take cash for gift cards that can only be used there, and deposit on lay-bys, and pocket it? And continue to trade? Insolvency, yes, but they aren't in NZ, they are just taking gift cards at a 100% margin.

As I have said already three times this thread, people need to be PATIENT. It's very likely the situation will be resolved, but they need to get an ACCURATE assessment of the situation and limit the losses or issues for the shareholders.

They have said they won't be honouring them AT THIS TIME.

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#1464668 6-Jan-2016 21:15

antonknee: Except the NZ subsidiary is just that - a subsidiary of DSH. The entire group is in receivership and administration.

Effectively the DSE that exists now is legally a different entity from the DSE that existed prior to the 4th/5th of January. They are not obligated to honour the gift cards etc as technically it wasn't them that issued them or took the money in the first place.

Profitable is a stretch. The NZ division's NPAT was $1.3 million on revenue of just under $180 million - not even 1%. The group carries a significant amount of interest bearing debt (approx $70 million). The NZ division holds $11 million of debt, payable to the Australian parent which is interest free. If the NZ subsidiary were paying its share of interest, it would wipe out all the profit. The profit isn't really there in that sense - they are using the debt to fund their operations. The banks who own that debt are the ones who called in the receivers.

I didn't imply it wasn't a subsidiary, off course it is. Off course the entire group is under the same management now, who said it wasn;t?

NZ is profitable, it does;t matter right now how profitable, its earning money, and the role of the new management is to recover the highest level
of funds. And while NZ is making some money that adds to the funds, and it allows a sale as a going concern to exist. Which the banks clearly support,
and no doubts they are not needing to fund cashflow here.

I feel they can sell it here, and that the new ownership can make a go of it.

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richms

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#1464671 6-Jan-2016 21:17

Wonder if people will start to offer to buy the "unusable" gift certs on a few cents in the dollar or something.

Richard rich.ms

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#1464674 6-Jan-2016 21:19

networkn:
tdgeek:
antonknee: I think that's probably a pretty succinct and accurate statement.

DSE's management have indicated they would continue to trade, and by all means it is evidently the banks which called in the receivers (and led to the administration). I don't think they intentionally sold gift cards intending not to honour them. Doesn't make it any less awful for the people stuck with gift cars they can't use.

And, as the NZ division is profitable, why cut those cards off?? Its one thing not being able to replace goods if they are broke, but to take cash for gift cards that can only be used there, and deposit on lay-bys, and pocket it? And continue to trade? Insolvency, yes, but they aren't in NZ, they are just taking gift cards at a 100% margin.

As I have said already three times this thread, people need to be PATIENT. It's very likely the situation will be resolved, but they need to get an ACCURATE assessment of the situation and limit the losses or issues for the shareholders.

They have said they won't be honouring them AT THIS TIME.

I agree, although wasn't that stated from a sales person, thats what I read.

antonknee

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#1464695 6-Jan-2016 21:49

tdgeek:

I didn't imply it wasn't a subsidiary, off course it is. Off course the entire group is under the same management now, who said it wasn;t?

NZ is profitable, it does;t matter right now how profitable, its earning money, and the role of the new management is to recover the highest level
of funds. And while NZ is making some money that adds to the funds, and it allows a sale as a going concern to exist. Which the banks clearly support,
and no doubts they are not needing to fund cashflow here.

I feel they can sell it here, and that the new ownership can make a go of it.

I was just saying why they won't be honouring the cards even though the NZ division is profitable on paper. Profits aren't relevant to that particular situation unfortunately. While in receivership/administration they are legally a different entity to the one who sold the gift cards.

I agree with you. There are plenty saying it's trash, but I think that a core retailer with deep pockets and serious retail experience could take it on and make it work. Think James Pascoe Group or The Warehouse Group. There would need to be some serious strategy changes to make DSE stand out from the crowded CE/Appliances marketplace, and the new buyer wouldn't be keen to take on the dead stock (like all the private label rubbish DSE have).

It's probably a good fit for JPG given their history with Whitcoulls and Farmers, and the fact that Farmers is moving further and further away from the tech/CE markets (although they are being very aggressive in appliances right now).

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#1464697 6-Jan-2016 21:55

Hmm, I wonder if the banks chose to shutter after Christmas given they knew a significant amount of cash would be sitting in the accounts because of gift cards? It would maximize their repayment I suppose.

oxnsox

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#1464702 6-Jan-2016 22:00

trig42: How big is the Riccarton DSE?
Would it be big enough to fit a JB HiFi? (JB Stores have a much bigger footprint than the average DSE, but a DSE Powerstore like they have at Sylvia Park, and Manukau would be big enough).
Wonder if JB are interested. Probably not given the small size of most of the stores.

DSE Riccarton would be roughly similar in size to the Slyvia Park JB-Hifi (which I think used to be a Noel Leeming).

Would be nice to have the Yellow store in the city.

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#1464704 6-Jan-2016 22:02

UHD: Hmm, I wonder if the banks chose to shutter after Christmas given they knew a significant amount of cash would be sitting in the accounts because of gift cards? It would maximize their repayment I suppose.

That's what the thinking is. Banks have their own shareholders to look out for, so anyone saying that it is mean of the banks is clearly living in an alternate reality.

Richard rich.ms

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#1464728 6-Jan-2016 22:15

Whats the legality of deciding not to honour the cards? If I walked into the store and told the staff that I am taking this printer and not paying for it, what would happen? If I gave them cash so as to have the gift card holder get the printer next week, then thats ok to say no, sorry?

Even worse for deposits on a lay-by.

Now, if they were insolvent, thats ok, but they aren't as NZ is trading and earning a profit. Strikes me they are having their cake and eating it too. Given that this is unsecured funds, it should be a case of they are valid, but they are an unsecured debt, you will be paid whatever is left, if any as an unsecured creditor. But its been stated that they aren't being honoured. I read a sales staff thought or said it was not honourable now, not necessary later. The funds cannot be not honoured, they are still a debt. Now, if it was stated we cannot honour them legally now and why thats transparent, but everywhere its been implied as final.

oxnsox

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#1464732 6-Jan-2016 22:19

And lets not forget that when it comes to finacing, globally money is (and has been) very very cheap. So when the banks call your loan in it means you're not even making enough (and haven't been for some time) to pay even the minimum payment on an extremely low interest rate

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#1464737 6-Jan-2016 22:22

tdgeek: Whats the legality of deciding not to honour the cards? If I walked into the store and told the staff that I am taking this printer and not paying for it, what would happen? If I gave them cash so as to have the gift card holder get the printer next week, then thats ok to say no, sorry?

Even worse for deposits on a lay-by.

Now, if they were insolvent, thats ok, but they aren't as NZ is trading and earning a profit. Strikes me they are having their cake and eating it too. Given that this is unsecured funds, it should be a case of they are valid, but they are an unsecured debt, you will be paid whatever is left, if any as an unsecured creditor. But its been stated that they aren't being honoured. I read a sales staff thought or said it was not honourable now, not necessary later. The funds cannot be not honoured, they are still a debt. Now, if it was stated we cannot honour them legally now and why thats transparent, but everywhere its been implied as final.

NZ DSE is a 100% subsidiary of the Australian parent group, therefore their financial position is that of the parent. If DSE Australia is technically insolvent then so is DSE NZ.

Here is a crazy notion, lets give peace a chance.

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