This is my third and final post about Dick Smith Electronics (DSE), the decades old tech stalwart that finally succumbed today after a long and seemingly incurable illness.
25th February 2016: Dick Smith Receivers announce the closure of Dick Smith Holdings Limited
Back in 2013 in a post called “Why Dick Smith Electronics is a dead brand walking” I questioned whether the 2012 acquisition from Woolworth’s was anything other than a smash and grab by a savvy PE firm. Having visited several Dick Smith stores in Sydney it was clear that the experience paled when compared with their all-conquering tech-retail benchmark JB Hi-Fi. In fact there was a complete absence of service at any of the DSE stores.
Then by late 2013 it seemed inevitable, Anchorage Capital’s genius smash and grab would lead to a Listing on the ASX before the PE clever clogs would bail with a sack full of cash.
Is Dick Smith Turning Around “No, I suspect the miracle turnaround begins and ends when Anchorage offloads its investment in Dick Smith in record time to Retail Investors through a listing, or to the management team beforehand, and for as much as 20x the $20m they paid Woollies!”
By December of 2013 DSE was listed and my 20x estimate was smashed. In truth, as detailed in this excellent breakdown by Matt Ryan at Forager, Anchorage invested only $10m of their own capital and reaped $520m in return!
However, behind the tragedy of today’s store closures and related job losses there’s a fascinating data point to be mulled over.
“on a per-store basis, JB staff outnumber Dick Smith 4 to 1!”
DSE grew to 363 stores by 2015 compared with JB Hi-Fi’s 187 stores, yet according to JB Hi-Fi’s 2015 Results, they employ 7,320 staff!
Ignoring HQ employees (and the impact of Part Time staff), JB staff their stores at a rate of almost 40 per store, DSE employees numbered 3,300 at its 2015 peak, meaning less than 10 per store! On a per-store basis, JB staff outnumber Disk Smith 4 to 1!
Which begs the question, was DSE ever likely to succeed on high street sales? Or was it built as a short term ASX investment rocket with aggressive plans for store expansion set against JB profits benchmark? It certainly was that.