Consumer electronics retailer Dick Smith Holdings Ltd (ASX: DSH) has flagged another round of cost cutting which will involve the removal of 80 jobs from its head office, supply chain and IT.
So What: The job cuts come after the recently-listed retailer reported a weaker than expected result for its December half. During the period, total sales rose 8.9% (thanks in large part to the opening of 11 new stores – comparable store sales rose 2%) while net profit after tax (NPAT) increased just 0.8%. Its gross margin also fell as a result of tougher competition and discounting activity.
The company, led by CEO Nick Abboud, said the initiative will generate savings of between $8 million and $12 million as of July 2015, although there will be one-off costs of approximately $6.9 million and $7.9 million (before tax) associated with the move. This will ultimately contribute to the company's objective of reducing cash costs of doing business to between 17.5% and 18% of sales by the 2017 financial year.
According to the release, the restructure would also make it easier for suppliers to do business with Dick Smith as well as improving efficiencies in its supply chain.
Now What: Dick Smith's management also took the opportunity to confirm its guidance of approximately 10% sales growth for the full-year and EBITDA (earnings before interest, tax, depreciation and amortisation) growth of 7% to 9%. NPAT should also grow between 3% and 5%, excluding the once-off costs mentioned above.
In addition to its cost cutting initiatives, Dick Smith's growth will also come from new store roll-outs and a greater focus on lower-cost online sales.
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