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David Jones welcomes Dick Smith into the stable

In a department store first, David Jones (ASX: DJS) has signed an exclusive agreement with Dick Smith to effectively develop and operate DJ’s electronics business. Under the agreement Dick Smith will acquire the existing electronics inventory as well as associated fixtures and fittings. Front line staff will be transferred to Dick Smith.

The agreement includes all electronics sales both in-store and through the David Jones webstore. White goods and small appliances are not included. David Jones will control branding and the relevant customer database.

The initial term of the agreement is three years, with three annual options thereafter. The agreement comes into effect on 1 October 2013.

Dick Smith CEO Nick Abboud is quoted as saying the deal “will enable us to introduce aspirational and innovative products by partnering with world renowned brands in categories such as mobility, computing and accessories”. He also said the critical mass involved will strengthen Dick Smith’s buying power and prices would be very competitive.

Electronics has been a difficult business for David Jones and the agreement will ensure a more productive use of floor space. The ‘new’ business is expected to be profit positive within 12 months.

With JB Hi-Fi (ASX: JBH) reporting an increase in both 2013 sales and profit — signs are indicating the electronics segment of retail is at least stabilising.

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Motley Fool contributor Peter Andersen owns shares in David Jones.

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