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David Richards

Harvey Norman To Cut Back On IT & Consumer Electronics

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Harvey Norman is set to move away from relying on consumer electronics and IT to drive sales; a move which analysts claim could benefit JB Hi Fi, The Good Guys and Betta Electrical.
Instead the national retailer is set to expand their homeware and small appliances range after Harvey Norman Chairman Gerry Harvey warned of a 40% plunge in profits.

Several IT and CE vendors polled by ChannelNews claim the move could have an impact on their overall sales. Some vendors claim the move could benefit JB Hi Fi and online resellers of technology goods.

“The results are worse than we expected,” chairman and co-founder Gerry Harvey said yesterday.

An adjustment in property values has also impacted the retailer who said that the value of the retail stores they own would be down 29.5 per cent to $252.6m.

Pre-tax profits would be down by about 20-25 per cent, after full-year sales fell 7 per cent to $5.74bn, compared to the previous year.

Like-for-like sales also fell 6.5 per cent.

Franchisees at Harvey Norman have told ChannelNews that “negative” comments by Gerry Harvey in 2011 relating to online sales and the need for additional taxes on overseas sales had impacted the retailer with “hundreds of consumers switching their loyalty to other retailers”.

Despite the poor result Harvey Norman shares closed half a cent higher at $1.975.

Gerry Harvey believes price deflation played a major role in the Company’s sales decline; he said that TVs were $1000, less than half what they used to cost two to four years ago.

“A Toshiba laptop costs $3500 five years ago. Now you can pick up an even better one for $500,” he said.

 

“Price deflation in TVs and computers is happening across the world. It’s a big problem. Products are being sold for less than what it costs to produce them.”

Platypus Asset Management chief investment officer Don Williams told the Australian newspaper it was not surprising that Harvey Norman was suffering in a tough retail market where electronic prices are falling.

“The current price deflation is not going to go away soon,” Mr Williams said. “As a business, Harvey Norman has lost market share for some time to other retailers and online sales.”

Technology & Appliance Advertisers Could Do Better

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Consumer technology and appliance advertisers who spend million on marketing using a media buying Company could get better performance if they focus on the people working on their account claims Richard Halmarick a former media agency boss.

 

He claims that the experience of people working on technology accounts is often lacking because of staff churns as high as 70% within some media buying Companies.

Halmarick the former head of Aegis Media who spent many years working on the LG account has established a new business called Kinessis in partnership with Allan Medford the former regional director of Universal Mcann and Alan Robertson a former part owner of Merchant & Partners.

The primary objective of the business is to help advertisers get better value from their media buying Company.

Halmarick claims that technology advertisers could do better if the people working on their account had a better understanding of technology. “There is a high degree of staff churn in media buying Companies and this could hurt as technology is a specialised area”.

“Improvement is better than simply asking agencies to pitch and replace the incumbent” said Medford in an interview with the Financial Review.

“We want to help clients get better performance as during a recession a lot of Companies place greater scrutiny on agency performance and media costs” said Halmarick.

The Company that will only work for vendors believes that a lot of reviews are based on price rather than performance.

 

Often media account reviews done by our competitors come down to the lowest common denominators that is, how low agencies can drop their fees and the ad buying rates agencies can extract from media Companies” said Medford.

“Fees and rates are only a small part of the story. Clients need to get a lot more from their media buying Company” he said.

In recent weeks ChannelNews has been told that at least three major advertisers are set to review their media buying Companies.

Retravision Doomed Say Vendors

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Retravision is doomed say several CE Vendors with Narta the consumer electronics and appliance buying group for David Jones, JB Hi Fi, Bing Lee and several other leading retailers set to be bolstered by the sale of Retrovision’s largest retailer RT Edwards of South Australia to Radio Rentals.

 

Industry insiders say that he move to Narta who are responsible for buying over $ 3.3 billion dollars worth of goods will cripple Retravision and could well force the closure of other Retravision stores due to a lack of buying power.

During the past 18 months Retravision has reeled from one crisis to another.   In 2006 Retravision NSW was forced into administration. Also in 2006 Narta acquired Sydney based Whitfords. Also joining the buying group that year was Coffs Harbour based Morrison Electrical who deserted Retravision after more than 40 years.

Kay Spence the CEO of Narta told ChannelNews that she is currently in New Zealand and that while the Radio Rentals business will bolster Narta buying power, she was not in a position yet to comment on the issues affecting Retravision.

Several vendors who ChannelNews have spoken to today have said that they believe Retravision is doomed. “The insurance Companies are worried and we for one are reviewing our terns” said a major TV vendor.

An appliance vendor said “We don’t like kicking someone when they are down but the writing is on the wall. Narta are a very strong, well-run group and from here on in they look like getting stronger”.

A senior JB Hi Fi executive said “he fact is that both here and around the world,  the big electronics retailers are getting bigger and the small are just falling by the wayside”….many years ago when we started in this business, Retravsion was bigger than Harvey Norman, but that situation has well and truly reversed itself….it does put a lot of pressure on Retravsion and their business model”

Overall, looking at the sales figures, which i believe was quoted at around $100 million, it wont have a great impact- maybe it might for NARTA, but not for the overall sector..it sill have an insiginicant affect on the total market”.

“As for JB HiFi, we really don’t compete with them, so it wont affect us at all”.

 

More to follow.

Corporate Express Sold New Office Works Competitor An Option

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Corporate Express one of the biggest buyers of PC and office supply gear in Australia has been sold to U.S. office supplies company Staples with speculation now mounting that the Company is considering the setting up of a retail office supply network in Australia to take on OfficeWorks.

Corporate Express one of the biggest buyers of PC and office supply gear in Australia has been sold to U.S. office supplies company Staples with speculation now mounting that the Company is considering the setting up of a retail office supply network in Australia to take on OfficeWorks.

A senior executive of Staples told ChannelNews that a retail chain in Australia is an option and that “once the Corpate Express deal has been bedded down” the concept of a retail chain in Australia will be considered.

Staples has agreed to pay A$2.9 billion dollars for the Dutch owned Corporate Expresswhich has a major footprint in Australia.

Staples on Wednesday said it had raised its all-cash bid to 9.25 euros per share from the 9.15 euros it offered last week. Its first offer, in February, was 7.25 euros per share.

According to Reuters shares of Corporate Express rose 1.4 percent to 9.20 euros, almost triple the five-year low of 3.18 euros they touched in January before the takeover battle began. Staples shot up 4.4 percent, or $1.02, to $24.17 on Nasdaq.

For Staples, the deal expands its presence in the company contracts business where it competes with Office Depot and OfficeMax as well as Corporate Express.

“Staples will dwarf other office supply distributors,” Credit Suisse analyst Gary Balter said in a research note.

“The acquisition will move Staples to a leadership position in the contract (large company) segment in North America and will create a solid base on which to build its global contract footprint, with a No. 2 position in Europe and a No. 1 position in Asia-Pacific,” Balter added.

Dick Smith To Be Closed Thousands To Lose Jobs, Prosecutions Tipped

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As exclusively tipped by ChannelNews Dick Smith receivers Ferrier Hodgson has moved to liquidate the mass retail group as interested parties walked away from the deal.

The closure will affect 2460 staff in Australia, and 430 in New Zealand.

According to sources the information provided by Ferrier Hodgson was riddled with uncertainties resulting in three powerful Asian bidders walking away from a deal. 

According to a statement released by receivers James Stewart, Jim Sarantinos and Ryan Eagle of Ferrier Hodgson. 

In Australia, 301 stores will close, and 62 stores will close in New Zealand.  

Move stores were included in the closure announcement, and stores located in airports were excluded. 

The fashion-focussed Move concept chain launched in 2013, and grew to a total of 12 stores nationally. 

Mr Stewart said attempts to sell the Dick Smith group had been unsuccessful. 

“While we received a significant number of expressions of interest from local and overseas parties, unfortunately the sale process has not resulted in an acceptable offers for the group as a whole or for Australia or New Zealand as standalone businesses,” he said. 

Mr Stewart expressed his sympathies for employees, and said the outcome was disappointing for them. 

“We would particularly like to thank the Dick Smith employees for their support and patience during the receivership process,” he said.

Employees at head offices and stores have been briefed on the closures today, the statement advised.

They will also be provided with “appropriate outplacement support”, it read. 

All Australian workers are expected to be paid in full.

“All Australian employee entitlements will rank as priority unsecured claims ahead of the secured creditors and are expected to be paid in full,” the statement read. 

“Entitlements of New Zealand employees who are made redundant are preferential claims ranking ahead of the secured creditors, and are expected to be paid in full up to a maximum statutory limit of NZD$22,160 under New Zealand law.”

ASIC Moves In On Dick Smith Directors While Other Retailers Eye Off The Carcass

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The Australian Securities and Investment Commission who have more powers, now that Dick Smith has been placed into liquidation, is set to move on former senior executives of the mass retailer with several former executives supplying key information on questionable business activities at the mass retailer.

The big question now is what was not disclosed to shareholders that should have been disclosed. 


Yesterday Ferrier Hodgson announced that they were set to terminate 2460 staff in Australia, and 430 in New Zealand, all stores in the network will be closed. 

We can also reveal that one the main sticking points for potential bidders was the liabilities associates with the leases for Dick Smith stores as well as costs associated with the restocking of the stores. 

Insiders have told ChannelNews that now that Dick Smith is set to be liquidated, several Dick Smith stores could be taken over on new leases’.

Among the retailers interested in several Dick Smith stores in Australia is The Good Guys who made contact with receiver Ferrier Hodgson earlier this month.

Channel News has also been told that some stores in New Zealand could also be sold separately along with the Move stores in Australia, we understand that 20 key sites in Australia have been targeted by interested parties. 

One interested party is set to enter negotiations to buy the

Dick Smith name and the online operation. 

  
During the next few weeks’ receivers Ferrier Hodgson who has deliberately leaked information to select media in an effort to spin a positive story about Dick Smith is set to make millions from the collapse of the mass retailer while suppliers to Dick Smith are left with millions in losses.

Some distributors could also be placed into liquidation.

Both the National Australia Bank and HSBC are owed over $138 Million however there is little chance of the banks now recovering this money.

Both Indian conglomerate Tata and Chinese consumer electronics retailer baulked at the risks associated with restocking the mass retailers as research showed that the Dick Smith brand was “seriously” damaged. 

Currently ASIC is investigating the actions of directors. Several former employees have already supplied statement to ASIC investigators. They include former buyers and management who walked away from the Company claiming to ChannelNews that they were not prepared to “put up or be tarnished” with questionable business activities.     

James Stewart from Ferrier Hodgson who has ducked away from any serious questions about the actions of Ferrier Hodgson staff running a so called receivers sale or the the actions of former directors of Dick Smith claims that the banks are facing massive losses. 

We have been told that the Banks are already co-operating with ASIC and that information that has been uncovered by the receivers is currently being reviewed by investigators. 

Joseph Hayes from McGrathNicol is believed to have already started a formal investigation into the collapse of Dick Smith which has left executives such as Phil Cave the Chairman of Anchorage Capital whose brand is seriously damaged in the investment community, is laughing all the way to the bank with over $300 Million that Anchorage netted from the float of Dick Smith. 

Dick Smith the founder of the business claims that the business was only worth $90 million and the hype generated by Nick Aboud and Phil Cave was misleading.  

Dick Smith has accused Anchorage Capital the Company that floated Dick Smith netting $520M of “destroying” the business and putting close to 3000 staff out of work.

The founder of the original Dick Smith business said he had no interest in buying back the rights to the ‘Dick Smith’ name or any part of the troubled business.

“I wouldn’t look at buying back the name but I’m incredibly angry about the utter dishonesty of Anchorage Capital and I hope ASIC and the Senate Inquiry do something about them,” Mr Smith said.

Anchorage bought Dick Smith from Woolworths for about $94 million in 2012, before listing it through a $520 million public float 15 months later.


Dick Smith’s inventory was written down by $60 million on December 1 last year, two months after chief executive Nick Abboud issued profit guidance for the 2016 fiscal year of net profit of $37 million to $43 million.

Last week former CEO Nick Aboud did not comment when spotted at Balmoral Beach.

Also ducking for cover is former Chairman Rob Murray.

Hayes is the person acting in the interests of unsecured creditors such as distributors and vendors who have left millions out of pocket. Companies such as Roadhound who are owed over $18M and TV distributor Yale Prima who has told ChannelNews that they are owed over $10.2 Million dollars. 

It is now clear that the unsecured creditors will get nothing.

Then there is the inquiry by Senator Nick Xenophon’s whose inquiry into the collapse of “listed retailers” such as Dick Smith is set to go nowhere as it lacks any real powers other than being a means by which politicians can get media exposure in an election year. 

The Financial Review said that Stewart is reluctant to give precise numbers in relation to Dick Smith’s current financial position except to say that the company has $200 million in inventory and its employees are owed about $30 million in entitlements.

The employees have priority and will get what they are owed, Stewart says.

Stewart will probably pay the suppliers cash to satisfy the retention agreements and then sell the inventory as part of the normal fire sale process.

He has employed an international inventory specialist, Hilco Industrial, to assist him with the fire sale. Hilco is doing well out of Dick Smith. It was hired by the former owner Woolworths to value its inventory before it was sold to Anchorage Capital Partners in 2013.

Anchorage paid about $94 million for the business in 2013 and then sold it to the share market at a valuation of $520 million about a year later.

But Stewart followed the usual process of a receiver by running a liquidation scenario analysis. He found that the secured lenders would be better served by rejecting the purchase offer.

Stewart said in a statement: “The offers were either significantly below liquidation values or highly conditional or both.”

The sale process was affected by the company’s history. Discretionary retailers have been attractive to private equity which has turned them around and sold them to the market.

Is Big W & Masters Set To Flogged Just Like Dick Smith?

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Woolworths who are struggling with their Masters and Big W stores could consider flogging the two retail groups in the same way that they offloaded their Dick Smith assets claim analysts.

Back in 2012 Anchorage Capital acquired the Dick Smith assets from Woolworths for an initial $20M and a later payment of $74M, 18 months later the consumer electronics retailer was floated for $344M. The Company was not available to comment on the latest rumour that two more Woolworths assets could go up for sale. 
 
Global buyout firm Kohlberg Kravis Roberts is believed to be circling the struggling Woolworths operation who recently reported a 12.5% slump in profits. 

Several private equity Companies have told ChannelNews that they would be interested in buying the Big W and Masters chains who recently expanded their consumer electronics and appliance offerings.

Last week Woolworths appointed Gordon Cairns as Woolworths’ new chairman.

Shortly after his appointment the former Lion Nathan boss and current Origin Energy chairman signalled that all aspects of the business would come under review, he did not rule out selling Woolworths assets. 

While Woolworths has never been a seller, Mr Cairns’ comments after his appointment on Friday would have offered acquisitive buyout firms some encouragement.

After being appointed chairman, Mr Cairns, a veteran consumer goods executive, told The Australian he had “an open mind” about the future of the Masters hardware store chain and would make a decision based on the facts once he was in the job.

“Given that the facts look so disadvantageous for Masters, we see this comment in a very positive light,” Bank of America Merrill Lynch analyst David Errington, in his research commentary.

Publicity Seeking Choice, Now Has A Go At Netflix

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Choice the Australian consumer advocacy group who has turned to publicity stunts to drum up interest in their organisation, has taken a pot shot at Netflix over their geo blocking plans.

Choice basically wants Australians to breach copyright laws in an effort to overcome Netflix’s attempts to stop the illegal downloading of content that Netflix does not have the rights to in Australia.

It was only a few months ago that Netflix was crushing Samsung washing machines in an effort to generate publicity. 

Right now Netflix does not have the rights in Australia to certain Hollywood content. These rights are held by organisations such as Foxtel, The Seven and Ten Networks and Nine Entertainment or Roadshow who have paid large sums of money for the rights to this content. 

Netflix who are moving to become a global content Company have said that they will respect the rights of Copyright holds. Choice has said bugger this we will urge Australians to use questionable practises to obtain the content.   

Last week Netflix announced that it will use technology to halt proxy tools that allow subscribers watch programs available in other countries but not in their own.

Choice has slammed the decision, pointing out that there are about 8,500 items in the U.S. Netflix library compared to 1,300 in Australia.

Choice has not commented on the concept of people using technology to unlock them 

Now Choice whose subscriptions are falling, is urging Australian subscribers to help each other to continue using ‘unblockers’.

‘Many Australian Netflix subscribers will be shocked to find that they’ll be downgraded from accessing U.S. Netflix to the much smaller Australian library – losing out on thousands of titles,’ Choice director of Campaigns and Communications Matt Levey said.

‘Up until now, Australians could shop internationally for content using a simple unblocking service and their Australian account to access Netflix international catalogues.’
‘The popularity of Netflix in Australia has a lot to do with its progressive approach to content that allowed consumers to access more of the latest release programs from around the world in a timely manner.’

Choice argued that the 340,000 Australian subscribers were ‘baited and switched’ by the U.S. streaming company.

‘Rather than putting barriers up, it’s time to recognise Internet as global”. 

Netflix’s Vice President of Content Delivery Architecture David Fullagar told ChannelNews at CES that Netflix is working to allow all 190 countries where it is available to view the same library “but it won’t happen just yet” he said. 

‘We are making progress in licensing content across the world and, as of last week, now offer the Netflix service in 190 countries, but we have a way to go before we can offer people the same films and TV series everywhere,’ he wrote.

Linksys Find The Hot Spot

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Occasionally there are gadgets that come along that really hit the mobile hot spot. One of those is the new Linksys Wireless-G USB Network Adapter and Wi-Fi Finder (WUSBF54G).

I have just got back from a quick 10 day trip to Europe visiting Germany, Spain and the UK and just before I left the office a Linksys WiFi finder that doubles as a network adapter arrived for review so I decided to take it along. The new Linksys Wireless-G USB Network Adapter and Wi-Fi Finder (WUSBF54G) is a pocket-sized device that combines an easy-to-use wireless network scanner with a USB-connected Wireless-G network adapter.

In a nutshell this product is great and I will not travel without one again. Let me tell you why. Firstly Europe is miles ahead of Australia in delivering wireless networks in public places. At every hotel that I stayed at including two in Majorca and two in the UK I was able to use the Linksys WiFi finder to find a free wireless network without having to open up my notebook or pay for the network access.

Where Australian hotels are charging up to $19.00 a day to access broadband European hotels including on in the middle of the Island of Majorca are giving broadband away for free to hotel guests. However when moving between airport and train station getting the laptop fired up just to see if you can find some WiFi hotspot to leech off is a pain in the backside and that’s where the latest gadget from Linksys comes into play as I was able to find several free networks including one while sitting on a UK train.

Some WiFi finders are bulky, some find a signal and don’t tell you if its a secured network or not and others are just WiFi finders and still require you to have a WiFi card for your laptop. Luckily the Linksys WUSBF54G is none of these starting with its small size, the Linksys WiFi finder is a bout the size of your average USB memory stick and still it manages to cram in a useable LCD screen.

To use the Linksys WUSBF54G WiFi finder is simple. Firstly the kit is split into two parts, a scanner and a network adapter. A user takes out the scanner finds a network and then plugs the scanner into the Ethernet port on the notebook to access the network. A big plus is the ease with which one can ascertain the presence of a network with this device. In the past one had to boot a notebook wait for the Microsoft operating system to boot and then go to wireless setting to find a network using the Intel Centrino technology.

In some cases this could take up to 5 minutes only to find that there is no wireless network present.

In-Stat, a market research firm, reports that there will be almost 200,000 wireless hotspots available by the year 2009.

A push of a button on the WUSBF54G initialises a search for 802.11 wireless networks reachable via its 802.11G network adapter. I was able to set the search to include only open networks, all networks, or to search for signal strength in various areas for a specific network name (SSID).

Upon determining the networks in the area, the LCD screen on the WUSBF54G displays each network’s SSID, signal strength, 802.11 mode, and channel along with both the type and status of security. Its advanced search technology filters out 2.4GHz interference given off by microwave ovens, cordless phones, and Bluetooth devices, providing only information on 802.11 wireless networks. It then presents the networks in order of signal strength, until a specific network is selected.


Once a network is determined by scrolling through the presented information, the WUSBF54G can be used to establish an 802.11G network connection via the USB port on a notebook that has installed the included client utility software. This I found great as I was easily able to ascertain which wireless network had the strongest signal. The only downside is the price in Australia $A139.00. In the US this product is $A112.00 and in Europe $A118.00.

Linksys WUSBF54G WiFi finder reccomended retail: $139.00


SanDisk And Samsung Start Memory War

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Samsung Electronics has been dumping NAND flash with its customers since late February amid competition from SanDisk who this week rolled out several new products in Australia.

The situation is set to intensify as competion hots up in the channel sources have claimed with many saying the big winner will be consumers with lower MP3 device costs.

With weaker-than-expected iPod nano sales this year, Samsung has been trying to maintain control over its inventory levels by dumping excess stock with memory module makers, according to sources at downstream players in the MP3 market. Channel Insiders say that Samsung is pushing its products hardest with companies that it already has close ties with. One of the core problems is that Samsung expected higher sales to Apple which did not eventuate due to a slackening off of Nano sales to vendors such as SanDisk who are delivering a similar product to the Apple Nano with built in FM tuner colour screen a lower retail price and no scratch exterior MP3 coating.

Inventory pressure at Samsung has been further aggravated by price reductions from SanDisk. InSpectrum indicated that in the latter part of February SanDisk was quoting 1GB “finished goods” at US$30 for retailers, with that pricing being well below component costs. Financial services firm WR Hambrect indicated that SanDisk initiated price cuting in January 2006. During a visit to SmartHouse Offices this week Eric Bone the Worldwide Director of Consumer Products for Sandisk said that the NAND memory made up 70% of the cost of an MP3 player and that Sandisk were in a perfect position to compete with both Apple and Samsung.

According to company sources SanDisk distributor Zenitron admitted that it began lowering its prices in January but stressed that pricing was adjusted to reflect market trends. WR Hambrect also stated that Samsung was quoting its 1GB finished compact flash memory card for US$22 earlier this month. NAND flash spot prices have dropped by over 40% since 2006 with the largest drop being 56% for 4Gbit parts, according to InSpectrum. NAND flash contract prices have also dropped by as much as 37% through the first half of March. The downward price trend will persist in late March and the average sequential drop should fall 5-10%, the firm predicted.