Dick Smith shuts NZ office

18:17, Feb 17 2014

Electronic retailer Dick Smith has closed its New Zealand head office in Auckland and it is believed most staff at the distribution centre have lost their jobs.

However, the Australian owned business insists the move would not impact on its New Zealand network of 61 stores.

Dick Smith said it was committed to the continual growth and success of the New Zealand business, a spokesperson in Australia said.

It is understood the company will contract out the the Wiri distribution centre to a third party and create distribution hubs, removing the need the support office.

"While the restructure will result in more centralised operations, run out of Australia, there will still be a local presence in the NZ Support Office. There are no plans to close any Dick Smith stores within New Zealand," the spokesperson said.

The company would not say how many jobs were affected by the office closure, however Fairfax Media understands all marketing and sales had lost their jobs. Human resources and payroll were stripped back to one person each.

The retailer confirmed it had made structural changes to the support office division after a recent review of the business.

The changes were designed to ensure Dick Smith had the most sustainable and successful operations model to support the future direction of the business, the company said.

First Union transport, logistics and manufacturing divisional secretary Karl Andersen said said third party logistics was nothing new for New Zealand business because it was more cost effective to contact out.

Often it led to contractors deliberately undercutting labour costs to make sure they win a tender, he said.

The union would prefer to see companies employ their own labour, which was more secure for workers.

Dick Smith Manukau duty manager Keegan Lloyd said the store had not experienced any problems since the support office closure last month but it was too soon to tell what the long-term effects would be on stores.

Employees had not been told anything else about the future of the New Zealand stores, he said.

Milford asset management retail analyst Victoria Harris said the closure of the support office was not surprising.

"They are making so many changes."

Harris said while the company told Australian media that it was committed to the "continual growth" of the New Zealand business, Dick Smith might not have had the capacity to warrant a local support office.

Competitors like JB Hi-Fi had reported good sales growth and Noel Leeming was also expected to release strong results for the year so the squeeze in market share had to be felt somewhere, she said.

The New Zealand electronics retail market was "saturated".

Dick Smith listed on the ASX in December after Anchorage Capital bought the then-struggling electronics retailer from Woolworths in 2012.

The company's prospectus said it aimed to report an operating profit for the full year of A$71.8 million (NZ$77.6m), up more than 200 per cent from $23.4m in 2013.

"They've got pretty ambitious earnings targets for their first results and I guess they have to cut costs somewhere," Harris said.

Dick Smith was expected to shed more light on its plans for New Zealand when it released its first-half results to December 31 on Wednesday, she said.

Closing the support office might provide some "short-term relief" and help the company reach its financial targets.

Financial services company Credit Suisse's Australian director of equities research Grant Saligari said the support office closure would probably not directly impact stores but questioned how Dick Smith could operate successfully from Australia.

"The issue will arise how close it can stay to customers with outsourcing," he said.