The future of electronics retailer Dick Smith is uncertain after the company went into receivership just hours after being placed into voluntary administration this morning.
The move comes just a day after trading in shares was suspended as the company looked to refinance its debt.
Administrators McGrath Nicol were called in this morning with Dick Smith announcing it had been unable to find a way through the financial mire.
Just three hours after the revelation Ferrier Hodgson announced it been appointed receiver for the embattled business and would seek a buyer for the retailer.
Stores will continue to trade; however, in a massive blow to consumer confidence, gift vouchers will not be honoured and deposits will not be refunded, forcing customers onto the list of unsecured creditors.
It is not clear what will happen in terms of the retailer’s current marketing plans.
Creditors are expected to include media agency Atomic 212, which holds the account.
Jason Dooris, founder and CEO of Atomic, told Mumbrella this morning that it was “business as usual”.
Ferrier Hodgson receiver James Stewart, which was appointed by a syndicate of lenders, said the business was now for sale as a going concern.
“Dick Smith is one of the best known brands associated with consumer electronics in Australia and New Zealand,” said Mr Stewart. “We are immediately calling for expressions of interest for a sale of the business as a going concern.”
He said it was not yet clear what the primary causes of the collapse of the business had been.
The company invested heavily in marketing over the past year as it sought to resurrect the brand but, faced with a huge surplus of stock, it ran a series of massive sales in the lead up to Christmas.
These sales left the stores depleted of stock.
In a statement to the market, Dick Smith chairman Rob Murray said the decision to place the business in administration was done with “considerable regret”.
“Sales and cash generation in December were below management expectations, continuing a trend experienced during 2Q [second quarter] 2016.
“The company explored alternate funding, however, the directors formed the view that any success in obtaining alternative funding would not have been sufficiently timely to support short-term funding requirements and allow the company to order required inventory during the next four to six weeks.”
The statement said the company directors remained confident in the long-term viability of the business but “there was no option other than to appoint a voluntary administrator”.
Consumer concern about the viability of the brand reached a peak in recent weeks with the announcement of voluntary administration prompting many on social media to warn that gift cards should be used immediately in case the company was placed into receivership.