Dick Smith was put into receivership after failing to secure funding following poor trading results, including less than expected Christmas sales, and the weight of high debt levels. Reportedly, while the Australian retail operations of Dick Smith have revenue problems, the New Zealand arm of the company is profitable.
McGrath Nicol was appointed as receivers and the National Australia Bank and HSBC put high profile firm Ferrier Hodgson in as voluntary administrators.
Ferrier Hodgson has assured the market it will continue to pay the Dick Smith's 3300 employees and is keeping the doors open at its 393 stores, including 62 in New Zealand, as it looks at a restructure of the business and possible sale as a going concern.
There may, however, be some possibility of recovering the money for some consumers, with the Australian Securities and Investments Commission advising customers who bought gift vouchers to try to get their money back from their credit card provider. Customers who paid cash or used debit cards to buy the vouchers would appear, however, to have lost their money.
In the meantime, there’s been a groundswell of criticism from Dick Smith customers who are holding gift vouchers, with many voicing their anger on social media, including on Twitter and Facebook.
As the market waits for decisions by the administrators on the company’s future, the man who the iconic brand is named after – founder Dick Smith - has told ABC national radio that
the company's previous private equity owners had been greedy for wanting “unsustainable profit growth”.
"It was bought by a type of merchant bank who paid a hundred million [dollars] for it and 18 months later floated it for $500 million. Now you don't have to be very bright to know that's absolute greed, it's impossible and unfortunately that's caused this terrible problem at the moment," Smith told the ABC.
Private equity firm Anchorage Capital floated Dick Smith in December 2013 after buying the company from Woolworths in 2012.