Dick Smith has predicted profits will sink $5-8 million lower than previously anticipated after a disappointing start to the financial year.
The company previously predicted an annual net profit between $45 million and $48 million.
Chief executive Nick Abboud said margins were adversely affected by increased promotional activity and disappointing sales in tablets, gaming and accessories.
“Given the October performance and expectations of challenging and variable market conditions, we are cautious about the outlook for the all-important Christmas trading period,” said Abboud.
“We will maintain flexibility on gross margin to ensure we drive sales, reduce inventory and improve our net debt position.”
Despite poor October sales, overall sales for the first quarter of the 2016 financial year grew 6.9 percent.
Dick Smith continued to point towards New Zealand as an underperforming market, with profits down 67.5 percent to just $4.4 million.
For the 2015 financial year – its second full year since spinning off from Woolworths – the retailer announced sales were up 7.5 percent to $1.3 billion. However, net profits only grew 3.1 percent to $43.4 million. Earnings before interest, tax, depreciation and amortisation (EBITDA) were up 7.3 percent to reach $79.8 million.
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