Woolworths confirms poor Christmas UPDATE

Woolworths confirms poor Christmas UPDATE

	Published : Wed, 17 Jan 2007 09:21 By : Agencies Print this Story

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LONDON (AFX) - Woolworths Group PLC, the troubled sweets, CDs and stationery retailer, has confirmed it endured a poor Christmas with its main chain like-for-like sales down 4.6 pct over the six weeks to Jan 13.

This represents a small improvement from the minus 6.5 pct for the 18 weeks to Dec 2, as detailed in a Dec 5 profit warning.

The 97-year old group said it anticipated retail selling margins for the full year to end-January 2007 will increase by at least 100 basis points, with year end stocks at least 20 mln stg lower than the prior year.

Woolworths said its 2Entertain joint venture with BBC Worldwide traded in line with internal expectations, while sales of the combined EUK and THE increased 24.2 pct, with a 'satisfactory' trading profit forecast.

However, the group noted that THE has been impacted by this month's collapse into administration of Music Zone, which was a customer. Woolworths is working to recover debt due to THE but flagged uninsured losses at 2-4 mln stg.

Total group sales over the six weeks rose 2.2 pct.

Woolworths forecast full year trading profit, excluding the impact of Music Zone, within the current range of market forecasts.

After last month's profit warning, analysts slashed underlying pretax profit forecasts to 18-28 mln stg, down from the 57.7 mln stg achieved in the previous year.

Woolworths was the first major UK retailer to warn on profits before Christmas, blaming low high street footfall in October and November, a particularly 'challenging' market in CDs and DVDs and a slow start to sales of seasonal products.

HMV Group PLC, the music and books group, and Instore PLC, the variety store retailer, both issued alerts two weeks later.

The retailer took some comfort from a positive customer response to its move into multi-channel retailing through its 'Big Red Book'. Customer orders exceeded internal expectations and multi-channel sales grew 204 pct over the six week period.

However, this has added 'a few million pounds' of unanticipated costs to the business as Woolworths targeted reliable fulfilment of customers' orders.

Meanwhile, the group also announced that EUK has purchased Bertram Group Ltd, the book wholesaler, for 29 mln stg.

Woolworths' shares closed Tuesday at 33-1/2 pence, valuing the business at 489 mln stg.

Baugur, which through the Unity Investments vehicle (which groups Baugur with fellow Icelandic investor FL Group, and Kevin Stanford, the retail entrepreneur) holds a direct stake in Woolworths of 10.2 pct and has a further 2 pct through contracts for difference. It has been linked with a possible break-up bid or push for restructuring.

james.davey@thomson.com

jdd/am

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