Woolworths struggles under weight of Dick Smith

Bottom line hit hard.

Woolworths’ divestment of the Dick Smith chain of consumer electronics has incurred a net profit drop of 15 percent for its 2012 financial year.

The retail chain recorded net profit, including its discontinued Dick Smith operation, of $1.8 billion, down from the previous years’ $2.1 billion.

Notwithstanding a $383 million net cost for the restructure of Dick Smith, Woolworth's net profit rose 3.6 percent to $2.2 billion for the fiscal year.

Dick Smith sales increased 2.3 percent in Australia over the period, coming in at $1.6 billion. Woolworths has closed 74 Dick Smith stores to date, with a further 22 to shut down in FY2013. It currently has net assets worth $8.4 billion related to the Dick Smith chain.

Woolworths announced in January this year it would shut down the Dick Smith chain after a November 2011 review concluded the brand was not delivering a sufficient return on investment.

It announced it would close 100 of 386 underperforming Dick Smith stores, hoping to sell off the remaining outlets. Woolworths said several parties have expressed interest but no formal offers appear to have surfaced at this stage.

The resignation early this month of Dick Smith boss Debra Singh appeared to have been timed to coincide with the imminent sell off of the chain, according to an internal memo sighted by the Australian Financial Review.

The AFR cited several private equity firms, including Australian-based Anchorage Capital, as likely bidders. Woolworths is yet to comment on a potential acquisition.

Its shares were up $0.39 to $29.00 at midday today.