Woolies confident of turnaround by Christmas

Woolworths vowed to rescue sales in time for Christmas today after the struggling high street chain plunged deeper into the red.

The one-time retail giant said there was still “all to play for” in the next few months, even though pre-tax losses for the first half of the year widened from £36.2m (€53.9m) to £66.8m (€99.4m).

The deterioration came as like-for-like sales at its 800 stores tumbled 8.3% after it lost customers to supermarkets, specialist shops and the internet.

However, Woolies chief executive Trevor Bish-Jones said he was confident of a better second half after the sales decline slowed to 3.5% in the last seven weeks.

The company, which plans to turn itself into a store for “kids and celebrations”, said there were a number of schemes under way to boost sales before Christmas.

He pointed to the ongoing store refurbishment programme, plans to roll-out 92 of its Ladybird children’s clothing “shops within shops”, and a new Argos-style in-store and home catalogue to be launched next month.

Mr Bish-Jones said: “We are working to get the business in shape pre-Christmas. At this time of year it always looks like we have a mountain to climb but we usually just about get there.

“It was a difficult first half for Woolworths but, as ever with the group, it is still all to play for in the second half.”

As Woolworths does around two-thirds of its business in the second half of the year, Mr Bish-Jones said he was “relatively relaxed” about analyst forecasts for full-year profits of around £40m (€59.5m).

Investec Securities analyst Matthew McEachran said: “These results were behind expectations but there are clearly a number of initiatives that management is optimistic about – so there is a fighting chance of meeting forecasts this year.”

Seymour Pierce analyst Richard Ratner was less optimistic about profits and said it was “still a case of good management – awful company”.

Woolworths has faced stiff competition from supermarkets such as Tesco and Asda as they move into non-food ranges.

Sales have also been hit by the rapid growth of shopping online, with web-based stores such as Amazon taking sales of books, CDs and films.

The company said today that sales in the 26 weeks to July 29 were particularly bad after being hit by the football World Cup, which dragged shoppers away from the high street.

It also pointed to the July heatwave and subsequent fall in chocolate sales as well as the weak music and video market due to a lack of high-profile releases.

Despite the falling sales, the 97-year-old group remains the UK’s eighth largest non-food retailer.

It now plans to focus on children by extending its Pic ’n’ Mix range of sweets and by concentrating on birthday cards, Halloween outfits and Easter eggs.

Mr Bish-Jones said a key driver of growth would be the Ladybird clothing range and its new catalogue, which will enable customers to buy over the phone, online or in a shop.

In the longer term, Mr Bish-Jones said now was not the right time to sell parts of the retailer such as Entertainment UK, its CD and distribution business, or 2entertain, a publishing joint venture with the BBC.

But he said the company would close some of its larger stores in favour of smaller locations because of increasing rents, energy bills and staff costs.

“A small number of our larger stores begin to look economically unattractive,” he said.

“Where this is the case, we will explore options, ranging from disposal or store downsizing to store relocation.”

Shares in Woolworths lifted 3% to 34p today after falling from a high of 55.5p in March last year to a low of 29.75p earlier this year.

The stock has been buoyed recently by rumours that it might be a target for Icelandic investment group Baugur, which owns 10% of Woolworths and recently bought House of Fraser.

But Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers today doubted a deal with Baugur would take place.

“Ultimately Woolworths remains in a difficult place,” he said. “Like-for-like sales are down, competition from the supermarkets in particular continues to bite, and even the speculation surrounding Baugur seems less likely than ever, given its preoccupation with House of Fraser.

“In all, this remains a torrid time for the group and, whilst Christmas might provide a brief respite, the market consensus remains that the shares are a "hold" at very best.”