David Jones has offloaded its worst performing division and largest drain on sales to Dick Smith Electronics.
From October 1 the electronics sections of David Jones department stores will be run by Dick Smith and rebranded as `David Jones Electronics Powered By Dick Smith'.
Dick Smith will be responsible for the sales of electronic goods including TVs, computers and tablet devices sold at David Jones outlets, including its online store.
In return, David Jones will receive a monthly payment from Dick Smith based on a fixed percentage of sales.
Dick Smith has also agreed to pay an undisclosed set minimum payment, which will ensure the arrangement is profitable for David Jones regardless of the performance of the division.
The deal will remove the biggest drain on the department store's sales performance, chief executive Paul Zahra said.
More than 50 per cent of the sales drop experienced by the company in the first three quarters of the 2012/13 financial year could be attributed to the electronics division, he said.
"Since 2009 (electronics) has continued to decline, with double digit negative growth on top of double digit negative growth," he told reporters on Monday.
"This deal has enabled us to turn what was an underperforming category, adversely impacting our sales and profit into a de-risked positive profit contributor to our business."
Dick Smith CEO Nick Abboud said the deal would help boost his company's buying power and expand its reach.
"Its a win-win for both companies," he said.
"Dick Smith is expanding its network and reaching a wider, high-end customer base, while David Jones is increasing its product and services offering for its customers.
"It also strengthens Dick Smiths buying power, which in turn allows for more competitive prices for customers across both stores."
One-off costs of the deal these would be more than offset by the profit the arrangement will net in its first year, Mr Zahra said.
He also ruled out similar deals for other sections of its stores.
"This category didn't contribute profitably to Davis Jones, that's the only reason we looked at this model," he said.
David Jones shares were up 13 cents, or 5.0 per cent, at $2.74 at 1431 AEST.
