CASE STUDY

DICK SMITH HOLDINGS LIMITED

Overview

  • Dick Smith was acquired from Woolworths in November 2012
  • Dick Smith is the largest retailer of consumer electronics in Australia and New Zealand by number of stores
  • Anchorage, together with management, implemented a rapid and highly successful turnaround program
  • Successfully listed on the ASX in December 2013, with Anchorage retaining a 20% stake, which was subsequently sold down in September 2014.

Transaction background

Dick Smith had been owned by Woolworths since the early 1980’s, until early in 2012 when Woolworths announced the business was non-core and underperforming and commenced a sale process.  After a period of exclusivity, in November 2012 Anchorage acquired the business for $20 million.  

Business overview

Dick Smith is the largest consumer electronics chain in Australia and New Zealand by number of stores, with approximately 381 stores in October 2014.  Dick Smith sells a wide range of consumer electronics products, including computers, printers, tablets, mobile phone handsets and connection plans, televisions, DVD players, audio products, and numerous related accessories and services.  The business sells primarily through its physical store network, and also operates an award-winning website providing the full range of Dick Smith products and services. Revenues for the year ending 30 June 2014 were approximately $1.2B.  

Turnaround program

Following the acquisition Anchorage introduced a new CEO, Nick Abboud, and further strengthened the existing management team with several new additions. In partnership with Anchorage, this management team immediately began implementing a highly successful program of operational, strategic, customer and cultural initiatives across all areas of the value chain. The major initiatives are listed below:
  • Stores and staff: KPI dashboards rolled out to all stores linked to staff incentives, implementation of a “Serve Forward” in-store staff training program, improved recruiting policies and rostering processes
  • Suppliers and buying: Developed strategic relationships with key suppliers and renegotiated agreements, opened a Hong Kong sourcing office for private label products
  • Marketing: New marketing program in collaboration with suppliers; “Dick Live Daily Deals” television advertisements launched
  • Inventory and supply chain: Significant clearance of old and obsolete stock; improved stock management and ordering practices; optimised freight movement including closure of two distribution centres
  • Other: Migrated website to a new digital platform allowing greater flexibility, functionality, efficiency and customer experience; renegotiated all key contracts and procurement agreements
In addition, during Anchorage’s ownership period Dick Smith began expanding its store network under a combination of three different store banners.
  • Dick Smith stores: Trialled a new store format, and prior to the IPO rolled out 10-15 new stores in high priority locations in Australia
  • David Jones Electronics Powered by Dick Smith: Entered into a concession agreement with David Jones to take over operation of the consumer electronics departments in all of their department stores (30 locations across Australia), commencing in October 2013
  • Move: Developed a smaller format, concept store focused on mobility products and accessories with an emphasis on fashion, under the Move brand. The first store opened in Bondi Junction in August 2013

As a result of the turnaround program and growth initiatives, EBITDA increased from $23.4M in FY13 to $71.8M in FY14. 

Exit

Following the completion of the turnaround program and the transition to a growth agenda, Anchorage began to explore exit options.  The IPO was successfully completed in December 2013.