Dick Smith has taken a $60 million write-down on inventory following a review prompted by disappointing sales.
The retailer's share price got hammered in Monday trading, falling by more than 50 percent from 66c to 26c. Shares have since risen to 32c.
Managing director Nick Abboud said that next year’s profits would be $5-8 million lower than previously anticipated due to increased promotional activity and disappointing sales in tablets, gaming and accessories.
Abboud added that November trading was also below expectations, and a further impairment may be required. “We remain cautious on the outlook for the Christmas trading period. We will continue to drives sales, maintaining flexibility on gross margin to reduce inventory and improve our net debt position.”
Despite poor October sales, overall sales for the first quarter of the 2016 financial year grew 6.9 percent.
For the entire 2015 financial year, retailer announced sales were up 7.5 percent to $1.3 billion. However, net profits only grew 3.1 percent to $43.4 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) were up 7.3 percent to reach $79.8 million.