Dick Smith Electronics - the nerve

MortonH · #1 17-01-2016, 04:09 PM

As I'm on the mailing list for DSE I received an email today entitled "An Open Letter to our Customers" in which they attempted to sell the idea that "we're still here, come and spend your money with us".

But here's the inequity. If I walked in today and gave them $500 I would be able to walk away with $500 of stuff. But any poor sod that bought $500 of gift vouchers before Christmas can no longer use them. In my book that's theft.

I should point out that I'm NOT one of those affected by the gift voucher ripoff. I understand that this is how things work in a receivership situation, but the truth is that they deliberately waited to maximise their Christmas intake of cash before voluntarily going into receivership, thereby knowingly screwing anyone that bought vouchers as a Christmas present.

Spend more money in Dick Smith? No chance!

Regulus (Trevor) · #2 17-01-2016, 06:20 PM

It is indeed theft.
So is the idea that a gift card can expire. These are 'place-holders' for for Aust. legal tender, which doesn't expire. They cannot take you money and give you nothing in return. The card is a promise by them to honour a transaction for goods up to the cards value. A promissory Note, if you like.
That they can now cancel them is wrong, but typical. The 'unsecured' creditor gets shafted every time.

But on you main topic; yeah, you wouldn't trust them with a new lay-by, would you? The private Equity firm made an absolute killing on this and gave us all a lesson, if we needed it, on just how much a brand, employees, and customers mean, to those businesses that produce nothing of worth except profit. Disgusting.
Trev

xelasnave · #3 17-01-2016, 06:39 PM

Probably blame the liquidator.
They roll in and write themselves a cheque for fees and then rank creditors so I believe.
I have good reason to say this but I have no evidence.
Nevertheless these decisions can only be made by the liquidator one would think.

MortonH · #4 17-01-2016, 07:08 PM

I understand that companies can cease trading and people get screwed, but I don't remember such a callous example as this where "they" (Anchorage Capital, DSE or whoever) raked in lots of cash at Christmas for vouchers then announced those vouchers were no longer valid but continued trading as if nothing had happened.

xelasnave · #5 17-01-2016, 07:22 PM

One would have thought that legislation would be in place that caused payments for gift cards to be treated as trust funds.

PCH (Paul) · #6 17-01-2016, 08:38 PM

Quote:

Originally Posted by MortonH

I understand that companies can cease trading and people get screwed, but I don't remember such a callous example as this where "they" (Anchorage Capital, DSE or whoever) raked in lots of cash at Christmas for vouchers then announced those vouchers were no longer valid but continued trading as if nothing had happened.

They knew exactly what they were doing. Apparently in the run-up to xmas they were offering 10% extra value for gift cards, - ie $110 of card for $100 of money.

It stinks alright!

bugeater (Marty) · #7 17-01-2016, 08:43 PM

Quote:

Originally Posted by MortonH

I understand that companies can cease trading and people get screwed, but I don't remember such a callous example as this where "they" (Anchorage Capital, DSE or whoever) raked in lots of cash at Christmas for vouchers then announced those vouchers were no longer valid but continued trading as if nothing had happened.

When Borders went under they would only honor your gift card if you spent an equal amount. In that situation the company was still fully owned by a private equity firm (well private equity fund to be accurate). In the case of Dick Smith I think Anchorage sold out quite some time ago didn't they?

These things happen after Christmas because retail's strongest period by far is Christmas. If the company is in challenging circumstances a poor Christmas will put it under but a good one could save it.

tonybarry (Tony) · #8 17-01-2016, 09:14 PM

It seems that some vendors who re-sold DSE gift cards will honour them.

http://www.news.com.au/finance/busin...3c956ec47500f1

Regards,
Tony Barry
WSAAG

Wavytone · #9 17-01-2016, 10:12 PM

Quote:

Originally Posted by Regulus

They cannot take you money and give you nothing in return.

Unfortunately you are wrong. The bankruptcy law is quite clear - holders of these cards are unsecured creditors.

First in line is the tax office.

Then the secured creditors (ie those holding a mortgage over the assets) mainly banks.

If there's anything left (highly unlikely) the insecurely creditors come last.

I do agree it was theft though. the management must have known the game was up and this trick is an easy way to rip people off. They can only get away with it once, so it's saved for the bitter end.

Oh .. And you can bet your bippy the directors paid themselves a handsome Christmas bonus, in the style of Christopher Skase, Alan Bond and Holmes A-Court.

The real rip off however was done long ago - the vulture who bought DSE for a song, dressed it up to look good and then floated it to the current shareholders. He walked away with millions.

The current shareholders were mugs - a pig wearing lipstick is still a pig, even an expensive one.

The_bluester (Paul) · #10 17-01-2016, 10:27 PM

Yep, if it ever looked like other than a cynical money grab to people the link below is an interesting read. I mean the events of the last year or two, not just the recent gift card snatch and run job.

https://foragerfunds.com/bristlemout...t-of-all-time/

MortonH · #11 17-01-2016, 10:32 PM

From the ABC:

Dick Smith: What went wrong?

Private equity group Anchorage Capital bought Dick Smith from Woolworths in 2012 for an initial payment of just $20m.

Anchorage then "dressed the company up to look good for just one thing - to persuade people to buy shares," according to analysts from Forager Funds Management.

Anchorage "wrote down the value of the inventory, took provisions for future onerous lease payments, wrote down the value of the plant and equipment and liquidated a lot of the inventory as quickly as they possibly could to throw off cash," according to Forager's Steve Johnson.

The cash was then used by Anchorage to effectively make Dick Smith 'buy itself'.

The writedowns inflated profits, a key factor in enticing investors into the company.

For example: a stock item that may have been bought for $100 may have been in the books at $60 after the writedowns, which meant an extra $40 profit on every sale.

The writedown of plant and equipment lowered depreciation charges, also boosting the bottom line.

"But when they liquidated all that inventory to pay for the purchase price, they didn't replace it," according to Forager's Steve Johnson.

"And the new owners of the business, since it's been listed on the stock market, have had to put in a lot more money to fund the increase in inventory."

So yes, Matt, Anchorage were 100% to blame.

doppler (Rick) · #12 17-01-2016, 10:43 PM

Here's a link to an interesting report.
http://www.news.com.au/finance/busin...109bce7a97ae50

Anyway I liked the original Dick Smith (and Tandy electronics) before Woolworths got hold of them, and got rid of the hobby electronics stuff. At least Jaycar is thriving in this little town.

AndrewJ · #13 17-01-2016, 11:02 PM

Amazing how unions get bashed for doing dodgy deals worth a few thousand dollars, but white collar criminals ( bank "advisors", east west tunnel "advisors", hedge fund scum like those linked to DSE etc ) dont get questioned when 100s of thousands just go missing.
Wonder whose side the govt ( of either persuasion ) is on????

Andrew

Exfso (Peter) · #14 17-01-2016, 11:04 PM

I stopped anything to do with them when they started calling themselves "The Techsperts", probably got the spelling wrong, but one thing they were not were technical experts, a glorified supermarket for electronic toys etc.
One used to be able to purchase all sorts of components etc, but that did not take time to go belly up when they Woolworths took over.

bugeater (Marty) · #15 17-01-2016, 11:06 PM

Quote:

Originally Posted by MortonH

So yes, Matt, Anchorage were 100% to blame.

Don't confuse the former owner doing well out of selling a company and it failing as the same thing. After all Woolworths sold Dick Smith cheap for a reason. I suspect the company simply isn't competitive and was going to go down anyway.

I would like to see an analysis that looks at whether what Anchorage did contributed to its insolvency, but what I've seen doesn't do that.

Wavytone · #16 17-01-2016, 11:16 PM

Anchorage is well known as a shark - they have pulled the sane act before - buy a failing company, dress it up to look good for those who do not understand the fundamentals and resell it to mug punters, and run off with the loot.

While DSE is not the first victim of Anchorage, FWIW Gerry Harvey made several valid comments ages ago as to why DSE would fail after Woolworths bought them. The retail model that DSE were using was a loser compared to JB HiFi or HN.

Both investors and consumers have been played for the mugs they actually are.

The_bluester (Paul) · #17 17-01-2016, 11:17 PM

I saw similar write ups to the one above some time ago, the company was arguably on its way down under Woolworths, but it does look very much like the subsequent events are an Arthur Daley style chickenwire, bog and coat of paint job to hide the rust and tart it up to sell for a motza after buying it for fifty bucks. The difference being it is pretty hard to buy a car using the car itself to mostly pay for it.

multiweb (Marc) · #18 18-01-2016, 08:13 AM

Yeah, very chonky behaviour. In my experience liquidators are no better than the companies. Creditors get in line and the loudest mouths get some of their money, sometime... joys of the corporate world. The reno boys, paulware house, car sales all those guys are still trading now and went belly up at some stage, now with a "clean bill of health"

AndrewJ · #19 18-01-2016, 08:32 AM

Quote:

went belly up at some stage, now with a "clean bill of health"

I note that just before Xmas, our current glorious leader was spruiking how he wanted to make this process even easier, so that people who want to "try" entrepreneurial endeavours, wont be penalised with bankruptcy conditions etc if they fail a few times.
Whilst i dont have a problem with the principle of that at a personal level, if they take innocent people down with them, they should be locked away.
Cant see that happening, as the govt, lawyers, bankers, accountants all make too much money out of the churning and phoenixing companies.

Andrew

bugeater (Marty) · #20 18-01-2016, 10:00 AM

Quote:

Originally Posted by multiweb

The reno boys, paulware house, car sales all those guys are still trading now and went belly up at some stage, now with a "clean bill of health"

I think Channel 9 is one of the better examples. It didn't technically end up insolvent, but only because of a negotiated agreement just before it was about to.

But in reality, what do you suggest as an alternative? People make mistakes, companies get into trouble and with restructuring they can still be viable ongoing businesses. Just because some investors (debt or equity) lost some money is neither here nor there. They are transactions between consenting adults and everyone should know the rules or not get involved. Now if fraud is involved, that's a different matter, but that isn't usually the case.