British retail chain keeps revival on course

British retailer Woolworths today said poor weather had failed to dampen trading as it reported a 1% rise in like-for-like sales at its high street stores.

The chain, which has revived its fortunes over the last 18 months, overcame weak demand for seasonal items such as outdoor furniture and summer clothing with strong growth elsewhere in the business.

The DVD and video release of the final instalment of the Lord of the Rings trilogy boosted sales of entertainment products, while electrical goods and stationery were also in demand.

Total sales from 803 outlets increased 7.4% to £1.04bn (€1.5bn) in the 24 weeks to July 17, the group said in a trading statement ahead of its interim results.

Woolies has been battling to turn around the business and improve sales after sliding more than £46m (€68.9m) into the red nearly three years ago.

In March, the group showed signs of improvement as an overhaul of its distribution system and improved product availability helped annual like-for-like sales rise 0.6% with profits up 33.9% to £66.7m (€99.9m).

The company is also in the early stages of a store revamp programme and 30 branches are due to be converted by the end of the first half of its financial year.

This follows successful trials at a handful of stores last year, including at Kingston in London, with improved lighting and layout.

Converting the stores will put a £5m (€7.49m) dent in its balance sheet for the full year, with the bulk of these costs incorporated into its interim results.

Woolworths said earlier this year that it would end expansion of its 23-strong chain of out-of-town Big W stores, which grew like-for-like sales by 1% during the period.

Chief executive Trevor Bish-Jones said the group was making positive progress after a solid start to the year.

He added: “We continue to be encouraged by the investment we are making in our stores and planning for the key Christmas period is well advanced.”

Woolworths also operates entertainment and audio-visual publishing divisions that supply retailers such as Tesco with CDs and DVDs in addition to its own stores.

Sales at these businesses improved 50% during the period – faster than the 45% growth seen at the time of its last update at the end of May.

Investec analyst Matthew McEachran estimated that sales of entertainment products at Woolworths stores were ahead by 9%, making it harder to assess the performance of its other product categories.

But he added: “The underlying performance of the business is showing some signs of recovery.”

Underlying group retail sales for the 24-week period grew by 1.6% after adjusting for electronic top-up sales of mobile phones and the outsourcing of the in-store café.

Rhys Williams, retail analyst at Seymour Pierce, forecast pre-tax profits of £78m (€116m) for the year to January 31 compared with the £66.7m (€99.9m) reported for 2003.