Dick Smiths overhaul reaping rewards: Woolworths

Woolworths (ASX:WOW) continues to overhaul its consumer electronics business Dick Smith as it seeks to reposition the brand in the Australian and New Zealand markets.

The company has rolled out a new format to its Dicks Smith stores across the two countries with 117 stores converted to date, representatives told a shareholder presentation. It expects to covert 168 stores by the end of the 2010 financial year.

A refresh of its online site in August has resulted in increased customer trading, the launch of its “Techxperts” delivery and installation service is gaining traction with customers and sales and customer service staff have been retrained, according to the company.

The changes have resulted in modest increases in sales; the Australian arm of the consumer electronics business reported a 4.3 per cent year-on-year increase to $710 million for the half to 31 December 2009.

Gross margin was $27.5 million, up from $25.72 million in the corresponding period, and EBIT was 27.5 million, up 28.5 per cent from $21.4 million over the same period.

The New Zealand arm reported a 2.1 per cent year on year sales decline to $187 million, gross margin of $26.42 million up from $25.1 million, and an EBIT decline of 28 per cent to $9 million, down from $12.5 million.

Online sales at the wider Woolworths-owned business’ sites increased 41 per cent year-on-year, driven by solid performances from the Dick Smith and supermarket sites, according to the company.

The company also plans to relaunch the website of its discount shopping store, Big W, in May.

Woolworths has invested in several IT projects during the half, including an upgrade to its data analytics capabilities, a roll out of fuel payment and loyalty scheme‘e-pumps’, an upgrade to its merchandising and financing systems, and a number of supply chain logistics and merchandising initiatives at Big W.

The company has also reviewed its IT program and reprioritised projects.

“The intellectual property developed in the supply chain teams IT systems and distribution centres for our Australian Supermarkets, BWS, Dan Murphy, Big W and Consumer Electronics,” the ASX report on the company’s 31 December 2009 financials reads.

Woolworths recorded an overall net profit after tax of just over $1 billion for the half, up 11.4 per cent year-on-year, and sales of $27.2 billion, up 6 per cent year on year.

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