The Bookseller.com

2nd December 2008

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'Disappointing' six months at Woolies

17.09.08 Philip Jones

Woolworth's has reported a further deterioration in sales in the first half of its financial year, and a loss at its retail arm of some £73m. The group said the "particularly disappointing" result in retail highlighted the "operational issues and strategic challenges" faced at its stores division. But it said that it expected strong full-year performances from its other businesses, including Bertrams' parent EUK, which would help to underpin a turnround the retail arm.

Group sales for the half-year were down by 3% to £1.12bn and the half-year group adjusted loss increased from £64.3mn to £90.8m. Retail sales for the first half were £660.7m compared to £695.6m in the first half of 2007/8, a decline of 5% in absolute terms and 3.2% on a like-for-like basis. Entertainment Wholesale & Publishing's sales to third parties were flat at £446.3m compared to £445.6m in the previous comparable period, translating into an adjusted operating profit of £2.2m (£2.4m 2007/8).

But Steve Johnson, incoming chief executive, remained confident: "I took this job because I am convinced that there is space on the high street for a successful home-based variety store offering great value and convenience. My first weeks in the job have only reinforced that view and shown me that Woolworths has a core of strong, profitable stores, a great retail brand and many very committed people who want to succeed. It is too early for me to have a fully developed strategy. That plan is in progress but still some way from completion and we will update investors as soon as possible."

The group statement added: "Within the retail business there is an enormous amount of work to be done, and in the coming months there will undoubtedly be some difficult decisions required to bring about the necessary changes. Overall, the group continues to work to identify ways to maximise sales and margins, working within the constraints of a difficult retail environment and its own funding resources. The board will undertake the necessary action to underpin the turnaround of the retail business and secure the future long term success of the group's businesses rather than focus on short term accounting profit. The board is confident that the hard work and commitment of all of our staff to making it succeed will enable us to quickly make progress."

The group admitted that there have been "underlying problems in the business [retail stores] for a number of years". And chairman Richard North told Reuters that he is open to talks with third parties on the future of the group's 815-store retail operation but has not put the business up for sale.

Retail Financial Philip Jones Woolworth's Bertrams EUK THE Steve Johnson