CULTURE BOX BUSINESS

 

Stores side of Woolworths slumps into loss

 

By Susie Mesure, Retail Correspondent Independent

 

Published: 29 March 2007

 

Woolworths is clinging to hopes that its push into catalogue and online retailing will help it to recover from a disastrous year that saw its profits crash by 74 per cent.

 

The group's chain of shops slumped into the red for the first time since it was spun out of Kingfisher, with the company relying on its non-retail activities to make money.

 

But Woolworths wants to grow its multi-channel revenues by 60 per cent this year to £125m and has turned its stores into mini-Argoses with catalogues for customers to order from a wider range of products than its small high-street outlets can hold. Customers can also shop online.

 

Trevor Bish-Jones, the chief executive, said the strategic shift was driving footfall into its stores, which he hopes will reverse the chain's 6.6 per cent slump in underlying sales last year. "If we get the growth we're anticipating in multi-channel, that will be a good fillip," he said.

 

So far, 2007 has started better for the group. Sales for the seven weeks to 24 March edged up 0.8 per cent on a like-for-like basis, which Mr Bish-Jones said was "comforting". Last year's sales slide forced a pre-Christmas profit warning and was to blame for a £12.9m loss against the previous year's £17.1m profit. Any fall in sales destroys the group's profits because Woolworths has to pay rent on all of its 800 UK stores. Selling the properties was the legacy Sir Geoff Mulcahy, the former boss of Kingfisher, left to the chain that he bought from its eponymous US parent in 1982.

 

"In terms of net profits, I would make more money than Sainsbury's and Asda, but I have to pay the rent," Mr Bish-Jones said in defence of the chain's dismal performance.

 

He added that, without the one-off costs of launching the multi-channel strategy and a refit programme, the retail chain should climb back into the black this year. Even so, analysts at Panmure Gordon trimmed their full-year prediction back to £26m from £31m.

 

Woolworths, which has its roots in America's five-and-dime store culture, was the world's first global retailer. Despite the chain's woes in the UK, it has outlived its former US parent, which metamorphosed into the trainer chain Foot Locker after deciding its future lay in the sporting goods industry. There are versions of Woolworths in several other countries, including Australia where it has sold food since the 1960s.

 

Woolworths has existed in a variety of formats in the UK, from the giant out-of-town Big W outlets to Mr Bish-Jones's recent experiment with a children-only offering. Nothing has so far solved the conundrum of how to stop the chain haemorrhaging sales to the supermarkets breathing down its neck.

 

"It's tough," Mr Bish-Jones said. "We have to keep pushing the business forward."

 

This has included strengthening its non-retail businesses, which comprise the E.UK wholesale and publishing group and its 2 entertain joint venture with BBC Worldwide. Even this half of the group has had its problems. E.UK lost Tesco, its main customer, sending Mr Bish-Jones on an acquisition spree and forcing him to find new contracts including one to supply Virgin Retail.

 

"E.UK was on its knees a year ago and we turned it around," he said.

 

Its entertainment wholesale and publishing arm is keeping the group afloat, providing profits of £53.1m last year against £56.4m the previous year. The division had sales of £1.3bn, up from £1.2bn, which included £195m from the exclusive rights deals it has for BBC programmes including Dr Who and Top Gear.

 

Group profits for the 53 weeks to 3 February fell to £16m from £61.5m the previous year on sales that were broadly flat at £3.1bn. The final dividend was held at 1.34p.

 

Mr Bish-Jones said the group would continue to tinker with its retail offer. He does not intend to extend the five-store trial of its Kids + chain, which saw sales jump in school holidays but slump in term time. The group is launching a new value brand, Worth it!, which he called an unashamed rip-off of Tesco's Value and Asda's Smart Price lines. Woolworths' version will span several hundred items and is intended to help sharpen its prices in a fiercely competitive market.

 

The group is aiming to improve its gross margins, which edged up 105 basis points, by a similar sum this year. "The things we can control are costs and margins. Sales will be what sales will be," Mr Bish-Jones said.

Probably cuz they stopped selling singles

Well they've closed ours completly in Leicester - sold it off to the highest bidder so they can make yet another crappy clothes shop :manson: That's all we seem to have here. :rolleyes:

I always found Woolworths c**p anyway for music - they used to do the 'buy one get one half price' on albums up to Christmas time but stopped for some reason - that was the only thing they ever had going for them imo.

They had a spell of every chart single album being £9.97 but that ended. Tesco and Asda are cheaper now.

Woolies is just generally so naff anyway... Who the hell wants to be seen dead buying stuff in there.... :lol: :lol:

Agreed, Woolworths were c**p for everything music-wise ... they didn't stock loads of stuff, and the stuff they did was over-priced and no-one bought it.

 

I'd never considered Woolies for music, so it's no loss to me ... I didn't even know we had on in Leicester :|

It's alot cheaper than HMV to buy music, i'v seen normal albums in HMV for like £18, they rip you off in there! My woolies also still sells singles :P

i like Woolworths i buy most of my music there ^_^

Agreed, Woolworths were c**p for everything music-wise ... they didn't stock loads of stuff, and the stuff they did was over-priced and no-one bought it.

 

I'd never considered Woolies for music, so it's no loss to me ... I didn't even know we had on in Leicester :|

 

Ha you're from Leicester? :lol:

Well if you are then it was in the Haymarket - pretty central right in the middle of town - you couldn't miss it. :mellow:

joy if Woolies closes here, we have 3 in about 3 miles of each other :lol:

 

I only usually go there for the offer of the week :lol: or stationery since Stationery Box closed :cry: WH Smith is just a rip off for stationery I find

Ha you're from Leicester? :lol:

Well if you are then it was in the Haymarket - pretty central right in the middle of town - you couldn't miss it. :mellow:

 

yep yep, well i'm there for uni anyway ... i think i know where you mean now, near primark?? ... shows how often i go to woolies :lol:

 

 

yep yep, well i'm there for uni anyway ... i think i know where you mean now, near primark?? ... shows how often i go to woolies :lol:

 

Yeh that bit lmao.

Though there's just loads of building stuff where it used to be now for the new clothes shop.