Petrina Berry
(Australian Associated Press)
What caused Dick Smith’s demise:
* All of the company’s cash reserves were spent on new stores, and the expansion was then funded with bank borrowings
* The retailer was also losing market share, with its revenue growth driven by new stores and sales at low margins
* Its range of products was not consisent with what consumers wanted, leaving a considerable amount of obsolete and inactive stock
* Clearance sales failed to generate sufficient revenue
* The company’s inability to obtain favourable credit terms also impacted on its stock levels, product range and presentation of its stores
*Cash flow pressures eventually led to the breach of its banking covenants
Information supplied by administrator McGrathNicol.
