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.
