Finance Finance News Dick Smith shares drop 60 per cent

Dick Smith shares drop 60 per cent

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Shares in electronics retailer Dick Smith have more than halved in early trade after a sales downturn forced it to abandon its profit forecast.

The retailer says sales were disappointing during October and November, the months leading up to the key Christmas trading period.

The trading update has spooked investors, pushing Dick Smith shares down 46 cents, or 69.7 per cent, to 20 cents at the start of trade.

The stock was 33.5 cents lower at 32.5 cents at 1021 AEDT.

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Managing director Nick Abboud says the group is carrying out a review of its inventory and will take a non-cash impairment charge of $60 million.

However, the figure could rise if sales don’t pick up ahead of Christmas.

“Given the non-cash writedown and the uncertain trading outlook, the company is unable to re-affirm the profit guidance previously provided,” he said in a statement on Monday.

Dick Smith in October slashed up to $8 million off its full year net profit guidance, saying it would fall to between $45 million and $48 million.

CMC Markets chief market analyst Ric Spooner said the update from the electronics retailer contrasted with more upbeat reports from other discretionary retailers recently, including David Jones, Myer and Oroton.

“It is obviously concerning, I think, for shareholders, coming as it does against a background of some signs that the overall consumer discretionary retail sector is doing a bit better, though they are only modest signs,” he said.

“It does appear, at least prime facie, to be related to Dick Smith’s competitive position and the attractiveness of their offers.”

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