Breakfast briefing: Retail news on Dick Smith and hedge spending tactic

Dick Smith in voluntary administration due to lack of funding

Struggling Australian electronics retailer Dick Smith has been put in voluntary administration after it was unable to secure necessary funding from its banks.

The company blamed its financial woes on worse-than-expected sales and cash generation in December, continuing the weak trend from previous months.

“Whilst confident on the long-term viability of the company, the directors have been unsuccessful in obtaining the necessary support of its banking syndicate to see it through this period,” chairman Rob Murray said in a statement.

Customers cash in on high street sales with 'hedge spending' behaviour

Consumers are adopting a 'hedge spending' tactic to capitalise on the high street sales, whereby shoppers purchase a product at full price and then wait to see if it features in the post-Christmas sales, a research has revealed.

Customers then buy the reduced item and return the full priced product.

"This Christmas we have seen an unprecedented level of discounting, with retailers extending their promotions over much longer periods, and the same can be seen for Boxing Day, with many retailers starting offers earlier this year and running offers well into the new year," said Vicky Brock, the chief executive of Clear Returns, a specialist in returns to shops.

The end result of hedge spending was a ‘triple hit’ for retailers that would hit their cash flow.