n.com listing price and the creditors report on Dick Smith.　 The Muir family have been keen to sell out of the electrical goods chain for around five years but the market conditions never seemed hospitable and the franchise business model had little appeal to trade buyers.　 The family has restructured the business for sale and is keen to complete an exit as soon as possible, if necessary, it is understood, retaining a minority shareholding as a good faith condition.　 The price the family wants for its 101-store chain has always been a sticking point, effectively an expectation of a $1 billion payday that has been pared back in valuations by advisors for a public listing.　 Michael Ford, CEO of The Good Guys Michael Ford, The Good Guys CEO, would prefer the public company option to a trade sale as he believes the business is poised for significant growth after buying out 56 franchisees by the end of June.　 Ford’s view is not surprising as he is looking to the future of the business, but the Muir family are still prepared to entertain the trade sale option as a potentially higher return.　 It is understood that chairman, Andrew Muir, asked parties that have shown interest in buying the chain to lodge an offer by July 18. Those parties include JB Hi-Fi, Steinhoff International and potentially Bain Capital and Harvey Norman.　 JB Hi-Fi is understood to have asked the Australian Competition and Consumer Commission if it would allow a takeover and a response is expected by August 4.　 There is no hurry for the Muir family, who have timetabled the public float option for “sometime before the end of this year”, which in itself is hardly a rallying cry to potential stock market investors.　 It seems more like a jilted bride scenario where the stock market will do if some a trade buyer suitor does not agree to the handsome dowry the Muir family is keen to receive. The likely timeframe if the float proceeds is between September and November, but it may well depend on market volatility and the sentiment of institutional investors.　 The advisors working on the float option are Helfen Corporate Advisory, Credit Suisse, Goldman Sachs and UBS, and their valuation for the business is between $800 million and $900 million, somewhat short of the Muir family’s $1 billion plus price tag. Yet Ford remains keen on the public listing and plans to expand the chain by 20 to 25 stores in the next five years and around 40 stores in the longer term.　 Ford has already learned from the Dick Smith failings and says the expansion would depend on securing the right locations given that it takes five to 10 years or a poultice of dollars to exit a non-performing store.　 Ford says The Good Guys, which has annual sales of more than $2 billion and projected earnings for this financial year of more than $100 million, is primed for growth after abandoning its franchise structure.　 While the franchise model delivered a motivated store management team, it limited new store development because franchisees were concerned about the cannibalisation of sales.　 Ford says competitors expanded and took sales and market share by moving into the markets that The Good Guys would have pursued if not for the drag of its franchisees.　 Investors wary of retailers The Good Guys’ roadshow will not be an all bells and whistle, tea and scones affair, with institutional investors wary of the financial projections, retail market and competitive analysis and growth strategies after the sting of the Dick Smith float.　 That debacle is fresh in investors’ minds as The Good Guys roadshow starts because of the report to creditors of the failed Dick Smith chain by the administrators, McGrathNicol.　 Investors will also be mindful of the tumble the Kogan.com stock took on debut, consistent with an Inside Retail Weekly caution that the online business was not an investment for the faint hearted. Notwithstanding new category entries and the acquisition of the Dick Smith online business, Kogan.com’s forecast net earnings of $2.4 million on sales of $241 million for the 2017 full financial year look like a magic pudding.　 Kogan.com’s earnings for FY2014 were $1.8 million, but fell to a loss of $300,000 for FY2015 and were expected to plump around $400,000 for FY2016, albeit don’t be surprised to see that sum reduced for the costs associated with the float.　 Part of the reason surrounding the retreat in the value of the Kogan.com stock on debut is no doubt the realisation that there is a leap of faith in the investment with Russell Kogan and co-director, David Shafer, retaining 69.2 per cent of the company and, effectively, absolute control. There is also a growing concern amongst analysts that Kogan.com is branching out too quickly into too many categories rather than consolidating, and therefore risking the same expansion stress that was at the core of the Dick Smith collapse. Kogan.com raised $50 million in its public float with shares offered at $1.80, valuing the company at around $168 million, a bit over half of what Kogan believed it was worth. The company is actually worth less than the $168 million now in any event, with stock being traded below the listing price at around $1.60. The capital raised through the listing is to be predominantly used for growth, including investment in new products and categories as well as marketing, activities. Dick Smith damned: report Any downside on Kogan.com would probably be more an irritant than a serious problem for The Good Guys, but the Dick Smith collapse will create a more critical evaluation of its listing plans.　 McGrathNicol, the administrators of Dick Smith, have released a damning report on the management of the company that will be presented to creditors next week (July 25) and keenly scrutinised by the Australian Securities and Investments Commission.　 Unsecured creditors will be savaged, having lost around $260 million and, of course, shareholders have also done their shirts. Secured creditors may receive around $100 million of about $160 million owed to them when the administration is finalised.　 The McGrathNicol report provides background to the financial performance of Dick Smith, the reasons for its failure, the outcome of the receivership and a recommendation that the companies be wound up and liquidators be appointed.　 In something of an understatement, the administrator, Joe Hayes, said the failure of Dick Smith, “represents an unfortunate end for one of Australia’s iconic retailers”.　 “The collapse was made all the more significant given its speed and scale, just a couple of years after the successful public ASX listing of Dick Smith, as well as the time of year, just following the Christmas period,” Hayes said in a media release from McGrathNicol.　 Hayes said attempts to find a buyer for Dick Smith had failed because potential purchasers saw no value in the network as a result of losses the business had sustained during 2015, the challenges in obtaining supplier support, the inventory mix in stores, and the low-margin, competitive environment in which it traded.　 Hayes said time will be needed to determine the real causes of Dick Smith’s rapid demise, and the significant turnaround in Dick Smith’s financial position following strong growth and results before it floated on the Stock Exchange in an over-subscribed initial public offering.　 He said the reasons for the failure of Dick Smith were, “complex and inter-related” and noted that management were very focused on increasing revenue and generating profitability at the expense of sustainable growth with expansion plans and store growth consuming all its surplus earnings and significant borrowings. “These expansion plans went unchecked during early to mid-2015, and major inventory purchasing decisions meant Dick Smith was carrying too much stock that was not saleable and was overvalued,” Hayes said. “By December 2015, a rapid clearance sale was needed at a time the business should have been achieving strong margins. Dick Smith failed because the company did not have enough cash resources available to meet its current and future commitments.” While the debt loadings and accounting methods of the pre-float private equity owners, Anchorage Capital, appear to have contributed to the failure of Dick Smith, the McGrathNicol report points to serious management failings and a lack of retail competence.　 The store expansion program consumed cash flow, added to debt, sapped management resources and dangerously increased inventory levels, but the buying strategies appear to be deeply flawed.　 McGrathNicol said there was insufficient analysis performed on comparable sales and the investment case to support continued store expansion.　 Dick Smith’s product range was out of line with consumer demand and relied heavily on house brand lines.　 The more telling flaw in buying, however, was that purchasing apparently was driven more by an addiction to supplier rebates than to consumer preferences, in large part, it seems, in a desperate attempt to generate cash flow.　 By October of last year, Dick Smith had accumulated an ‘inactive inventory’, virtually unsaleable stock of around $180 million that led to heavy writedowns and tighter reins from suppliers and financiers.　 McGrathNicol notes that Dick Smith had a larger store network than competitors and a higher cost base and was struggling with debt as it lost market share with comparable sales in stores declining.