Woolworths to sell struggling Dick Smith chain, close 100 stores: Midday Roundup

Woolworths has signalled that it will sell off the troubled Dick Smith chain following a structural review of the business, also announcing that it will close up to 100 stores over the next two years.

The announcement comes after an analysts’ report from CSLR that predicted the company would close over 100 stores in the chain.

According to a statement this morning, Woolworths said that its consumer electronics chain will remain important for Woolworths through its Big W chain and its multichannel offer.

“A strategic review, announced in November 2011, concluded that Woolworths’ main strengths are primarily in larger format, multichannel, high volume retail segments with market-leading positions,” the company said in a statement.

“The future of the Dick Smith business, which is profitable, experiencing positive sales growth and has a strong brand position, could be better realised through new ownership.”

The review found that investment and management attention given to Dick Smith “has been disproportionate relative to its position within the Woolworths’ group”.

With the company now focused on increasing activity in core trading divisions, the company agrees separating the model from the company is the best option.

“A divestment of Dick Smith will enable the Woolworths group to focus more investment on serving customers in its core business with a strong multichannel offer, backed with market leading fulfilment systems and an effective store network,” chief executive Grant O’Brien said in a statement.

Staff affected by the closures will be moved around in the Woolworths group, the company said.

Woolworths sales lift 5%

Woolworths has also announced a 5% increase in sales to $29.7 billion for the half year to December 31, despite difficult conditions, the company said.

“The first half result was solid considering the ongoing headwinds facing the retail sector with subdued consumer confidence and significant deflation along with the change in agenda we are driving through our business,” Woolworths chief executive officer Grant O’Brien said in a statement.

There was a 5.6% rise in sales in the supermarket division to $25.24 billion, while sales in the home improvement division rose 16.4% to $412 million.

Sales in the Big W division fell 1.3% to $2.3 billion, while sales also fell in general merchandise.

Shares have risen 1.5% after the announcement.

Shares rise after retail results

The Australian sharemarket has risen higher this morning after Woolworths released its half year results, along with flat results from overseas markets.

The benchmark S&P/ASX200 index was up 12 points or 0.3% to 4285.1 at 12.10 AEST, while the dollar was up to $US1.05c.

In the United States, the Dow Jones Industrial Average fell 6.7 points to 12,653.7.

Clive Palmer sues QR for $8 billion over rail link plans

Billionaire Clive Palmer has launched a lawsuit against the Queensland Government-backed rail operator QR National, seeking $8 billion in damages over its plans to develop a rail link in Queensland.

Palmer’s China First company says the planned rail link, announced last week, competes with its own plans to build a 500-kilometre rail link in the state, alleging a breach of conditionality and misleading conduct.

His spokesman is quoted saying the proposed link was an “outrage” as the company had already been in commercial discussions with QR national for cooperation in the joint development of rail and port facilities supporting the Galilee Basin.

IMF backs Government promise to return budget to surplus

Meanwhile, the International Monetary Fund has thrown its support behind the Federal Government’s pledge to return the budget to surplus in 2012-13.

“It is also the case that if there were to be a downside risk materialising – a further slowdown in the global economy – I think it is fair to say in Australia the authorities probably have more policy flexibility than almost any other advanced economy,” IMF Asia and Pacific region director Anoop Singh said in Washington.

“Clearly Australia has the ability to take actions if there were to be a further deterioration.”