Dick Smith's NZ annual profit drops, as margins shrink in 'challenging year'

Dick Smith wants to expand its store footprint across Australasia to between 420 and 430 stores by 2017 from its current 351, trimming down earlier aspirations to have 450. Photo / Dean Purcell

Dick Smith Holdings, the Australian consumer electronics chain, said its New Zealand unit reported a 71 per cent slump in annual profit after a "challenging year".

Net profit in New Zealand fell to A$903,000 (NZ$1,010,414) in the year ended June 28, compared to A$3.2 million (NZ$3.58m) a year earlier, the ASX-listed company said in a statement.

Sales declined 6.9 per cent to A$166.6 million while earnings before interest, tax, depreciation and amortisation declined to A$4 million from A$10.5 million a year earlier.

"New Zealand was challenging during the year reflecting macro and competitive pressures," chairman Robert Murray and chief executive Nick Abboud said in the annual report.

The kiwi unit shrank margins to 23.5 per cent from 25.6 per cent a year earlier.

"New Zealand sales declined 6.9 per cent, impacted by aggressive competitive pricing and a deterioration in consumer sentiment, particularly in the first half."

Local bricks-and-mortar retailers have been forced to shrink margins and offer discounts in a bid to compete with online retailers, who have fewer overheads and are able to offer attractive bargains to shoppers.

Compounding that, last month's Westpac McDermott-Miller consumer confidence report showed households' optimism was at a two-year low in the June quarter as it was dragged down by the deteriorating outlook for the dairy sector.

Dick Smith, which debuted on the ASX at the end of 2013, wants to expand its store footprint across Australia and New Zealand to between 420 and 430 stores by 2017 from its current 351 outlets, trimming down earlier aspirations to have 450 stores.

Group profit rose 3.1 percent to A$43.4 million on a 7.5 percent increase in sales to $1.3 billion.

The shares declined 0.2 per cent to A$1.78 on the ASX.