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Dick Smith issues caution after $60 million inventory write-down

Dick Smith issues caution after $60 million inventory write-down

Plans 70 per cent off everything sale to help move excess stock

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ASX-listed retailer, Dick Smith, has issued a cautious outlook as it heads into the Christmas trading period following a $60 million inventory write-down.

The retailer revealed it was conducting an inventory review and faced a write-down of about $60 million, meaning the stock is less valuable then what it was when initially purchased.

"While the inventory review has not concluded, the Board has determined a non-cash impairment of $60 million (pre-tax) is required," Dick Smith said in a statement to the ASX. "Further impairment maybe required depending on Christmas trading."

The review was prompted by a disappointing October performance and November trading was below its expectations. It is being conducted with the assistance of external consultants and is still in progress.

The retailer hinted that significant marketing activity will continue in an effort to stimulate customer demand during the Christmas trading period.

“We will continue to drive sales, maintaining flexibility on gross margin to reduce inventory and improve our net debt position,” Dick Smith managing director and CEO, Nick Abboud, said.

It has been revealed that the retailer is planning to conduct a 70 per cent off everything sale to help clear some of its excess stock, but this could lead to a pricing war among its competitors such as JB Hi-Fi and Harvey Norman.

On November 30, the retailer’s share price hit a low $0.23, but slightly picked up to $0.34 on December 1, at the time of publication.

This is steep decline since the retailer’s shares were trading at $2.21 back in June.

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