Dick Smith off Oz's top list

Photo / Ross Setford

Dick Smith has been struck off the Australian share market's top 200 companies list just as its stores launch a mammoth clearance sale.

Shares in the electronics retailer have tanked more than 80 per cent, wiping millions of dollars from its market value after it issued two profit warnings following disappointing October and November sales.

The retailer will be one of five companies removed from the benchmark S&P/ASX200 index on December 18.

This comes as Dick Smith kicked off a clearance sale, including 80 per cent off big-ticket items.

The firesale is expected to flood the market with cheap stock and put pressure on rivals JB Hi-Fi and Harvey Norman to also lower prices.

Dick Smith's share price has tumbled, closing down 2.5 per cent yesterday at A39c, slightly up from its nadir of A28c a share.

The retailer listed on the share market for A$2.20 a share two years ago, raising A$345 million after private equity firm Anchorage bought it from Woolworths in 2012.

Bell Direct equities analyst Julia Lee said shares would continue to slide in the short-term due to being cut from the S&P/ASX200 index.

"Some fund managers just track the index so they will be abandoning Dick Smith now," she said. "This is significant because index fund managers are gaining popularity as a low cost option to diversify portfolios, so if stocks leave the index it is a short-term negative as those funds will be forced to drop them."

She said if Dick Smith managed to turn around its operations it won't take much for its shares to rally.