The consumer watchdog is speaking with the receivers at Dick Smith to find out how the electronics retailer’s collapse will affect customers.
Receiver Ferrier Hodgson has said it will not honour gift cards or refund deposits on goods, prompting the Australian Competition and Consumer Commission is asking for more detail.
‘The ACCC is currently making enquiries of the receivers about how they will be dealing with consumer issues arising,’ the watchdog said in a statement on Wednesday.
Independent senator Nick Xenophon called on the corporate watchdog to urgently investigate the collapse and requested a parliamentary inquiry into whether the Australian Securities and Investments Commission missed warning signs.
‘The corporate watchdog ASIC needs to explain to Australians how this great Australian company went into receivership with seemingly little warning,’ Senator Xenophon said.
‘We also need to know whether our corporate watchdog has in fact been asleep on the front porch while Dick Smith Holdings unravelled.’
Dick Smith, which employees about 3,330 people across 393 stores in Australia and New Zealand, first warned in October its full year profit could fall as much as 15 per cent.
It stepped up discounting and advertising to boost sales but the slump continued into November, resulting in the company dumping its revised profit forecast just a few weeks later.
The retailer then launched a pre-Christmas firesale to clear unwanted stock that cost it about $60 million in writedowns, pinning its hopes on crucial holiday period sales, but sales remained worse than expected and the company’s shares were placed in a trading halt on Monday.
It went into receivership on Tuesday, with a syndicate of lenders including National Australia Bank and HSBC appointing Ferrier Hodgson with the aim of salvaging value.
The first meeting of creditors will be held on January 14.
Senator Xenophon demanded private equity firm Anchorage Capital Partners, which floated the company for $520 million in 2013 shortly after buying it for $94 million, appear before any parliamentary inquiry.
He told reporters in Adelaide that he hoped Dick Smith would continue to trade for the sake of the employees.
‘It is an iconic Australian company and clearly it has been let down by a whole range of factors,’ the senator said.
‘But if Dick Smith is going to collapse on itself because the numbers just didn’t stack up and there appears to have been some creative accounting that is well within the rules, then maybe the rules need to be changed.’
He said it was also time to ‘put the blowtorch’ to private equity companies like Anchorage to closely examine their tactics.