Woolworths closing down

Efforts to find a buyer for what was once Britain's largest retailer have been unsuccessful, so the going out of business sales are expected to begin as soon as tomorrow.

In what looks like the beginning of the end for the retailer, its administrator Deloitte has said that some shops could close for good by the end of the year.

Deloitte is also due to consult with Woolworths' 30,000 staff over the possibility of redundancies.

Talks over the sale of the leaseholds of individual stores are continuing. It is thought that Sainsbury's, Asda, Tesco, the Co-op and discount chain Poundland are still interested in picking up some of the retailer's prime sites.

Looks like Woolies might be broken up

Their are some buyers who want to take over Woolworths in its entirety, but it sounds like most bidders are interested in buying up individual locations.

Supermarket groups including Asda and Iceland have said they would be interested in individual stores. Tesco is understood to be interested in up to 20 Woolworths shops. Other retailers such as Poundland, Primark and Wilkinson are also probable contenders to acquire sites.

Deloitte (the administrator of the bankruptcy) says there are some interested in the whole enchilada, but one potential bidder says they see no hope for such a deal:

Iceland chief executive Malcolm Walker, who looked into buying Woolworths earlier this year, has cancelled himself out of the race for the retailer. "To run Woolies as Woolies, which is what we wanted to do, is now a lost opportunity," he said.

What is Woolies worth? A buck and a half

Actually one pound, but I don't know how to insert a pound symbol in Blogger..

One pound is what Britain's Woolworth's chain will reportedly be sold for, although the buyer, Hilco, may be balking at taking on the pension shortage of $150mil.

Woolworth's was in trouble before the economy soured (I posted this item back in June), and there has been takeover talk for a while. Reportedly there was a bid to take it over for 50 million pounds in August. Bet they wish they had taken that offer.

Any deal will also require the approval of the pick and mix retailer's banking syndicate, which recently appointed restructuring advisers Deloitte.

In a statement this morning, the Woolworths' board confirmed that it is in preliminary discussions regarding a possible offer for the retail business. However, it added that "there can be no assurance that any offer will be forthcoming".

It is widely believed that a demerger of Woolworths' underperforming retail arm and its media and distribution business – 2entertain, the DVD publisher, and EUK, a specialist distribution business – would be the best outcome for the struggling business.

One possible bidder for 2entertain is BBC Worldwide, which already owns 60 per cent of the joint venture.

Update, Sunday 23 Nov: According to this report, Hilco is now willing to take on more of the debt, but a decision must be reached very quickly or Woolworth's will have to declare bankruptcy.

Shake-up at Woolworths

In trouble even when times were good, UK's Woolworths chain is really hurting now. The result is that several top execs are gone, and a "retail operations board" has been created.

Woolworths has made a raft of changes to its management structure, including the creation of a retail operating board, two new appointments and four senior management departures. [...]

A Woolworths spokeswoman said: "The creation of a Woolworths retail operating board will help create the strategy to take the business forward and provide the leadership to make that happen. Steve Johnson said he wants to accelerate the pace at which he can develop and implement plans within the retail business and this is a big part of being able to do that."

Obviously changes need to be made, but since when does a committee "accelerate the pace" of anything?

Woolworths: possible takeover?

Back in June, I published a short piece here, quoting from a delightfully nasty article making fun of Woolworths, once Britain's retail powerhouse, but in recent years suffering a long, slow decline. I compared them to Sears.

It looks like times are getting even tougher for Woolworths. As here, the economy in the UK is weak, and a poor economy brings the weaknesses of companies to the surface (e.g., Mervyn's, Boscov's, Steve & Barry's). The boss has been canned and sales are down:

Variety store group Woolworths revealed a like-for-like sales decline of 6.7 per cent at its core retail business in the six weeks to July 26.

Group sales for the 25 weeks to July 26 slid 3.1 per cent and sales for Woolworths Retail dropped 3.2 per cent.

A high proportion of sales came from low-margin entertainment products such as CDs and DVDs, which, along with clearance, means that margin in the first half is likely to be down 125 basis points versus last year.

And, inevitably, the word now is that there will be a takeover:

Iranian property investor Ardeshir Naghshineh fuelled the rumour when it was revealed, after the markets closed that he had upped his stake in Woolworths to 9.68 per cent.

He is understood to be trying to put together a bid consortium for the beleagured retailer.

Of Woolworth's and Sears

The last Woolworth's stores disappeared from the US more than a decade ago and had become irrelevant long before that, though the company goes on (it's called Foot Locker today). Woolworth's has gone on being a powerful retail name around the world, however. Spin-offs of the US company continue to operate under the original name in the UK, Germany, Mexico, and South Africa. (The biggest retailer in Australia is named Woolworth's, but has no connection to the US company).

If this item is correct, Woolworth's UK may be on course to follow its American parent into oblivion:

Going, going, not quite gone, but most definitely in the departure lounge of life: Woolworths is suffering a long, slow death. For those, like me, who were children in the Fifties and early Sixties, it's painful to watch. An old friend, with whom too many of us have lost touch, awaits the coup de grâce.

This week, the company finally ditched its genial but ineffective chief executive, Trevor Bish-Jones. His six-year reign was largely a story of mitigating failure: much promised, little delivered. In the City, where sentimental attachment counts for zero, Woolies is an unfunny joke.

The company has 800 outlets, with annual sales of about £1.7 billion, but barely makes a profit. At 9p each, Woolworths' shares cost less than a handful of goodies from the pick'n'mix counter. Its stock market worth is down to £130 million, a tiny fraction of Tesco's £30 billion. Woolies' investors have lost nearly 85 per cent of their value in three miserable years.

The former king of British retailing is now worth 1/200th the value of the current monarch. That's gotta hurt.

Read the full article, if only for the delightfully nasty comments the author throws in, such as: "... Woolies lumbers along like a corporate stegosaurus, a beast the size of a bus, with a brain no bigger than a walnut."

When I read it, though, it kept reminding me of the long, slow, and on-going death of America's former retail leader, Sears. It's hard to believe that up until about twenty years ago, Sears was the biggest retailer in the world (I'm going by memory here, I couldn't find the exact figures and dates). In the late 80s, Sears, Wal-Mart, and Kmart were virtually tied for the top spot -- today, Sears and Kmart combined are about 1/7th of Wal-Mart in sales.

The reasons for the decline of Woolworth and Sears are similar, but can be summarized as a failure to adapt to changing conditions, abetted by flailing, inconsistent attempts to adapt (frequent strategy changes, management upheavals, etc). Much of the article about Wolworth's could have been cribbed from a history of Sears:

• "In the accelerating evolution of Britain's high street, fleet-footed rivals have adapted far more readily to changes in consumer behaviour; in some cases they have led them."
• "Most successful retailers stand for something distinct, whether it's price, quality, value, range or convenience. By contrast, Woolies has, in the jargon of professional marketeers, no unique selling point (USP)."
• "'Woolies' brand is an empty shell,' says Rita Clifton, chairman of Interbrand, a brand consultancy. 'There are lots of memories but nothing current, clear and vibrant. The stores are a shabby, disorganised nightmare.'"
• "On its bags, Woolies boasts: "Over 500,000 products to choose from with easy ways to shop." Inside the store, however, were rows of empty shelves."
• "It was a similar story throughout. On the shelf for light switches and bulbs, there were 18 price tags without corresponding items. In the Price Crash box for DVDs and CDs, there were 21 display units, but only four had anything in them. The confectionary rack at the main till appeared to have been supplied by militant weight watchers: no Twix or Galaxy bars."
• "The main headache for Woolies, however, apart from its self-inflicted wounds, was just around the corner: Tesco, the nemesis of many weak retailers. I could have hurled a bowling ball down Woolworth's aisles and hit no one. In Tesco, such action would have scattered shoppers like skittles. They were queuing eight deep at six checkouts with baskets fully loaded."

Sound like any of your recent experiences at Sears (assuming you've recently been in a Sears, which is unlikely)?

The real lesson to be drawn from this is that no one stays on top forever. Wal-Mart has made a number of missteps in recent years (mostly in their international operations), and the long-term effects of internet retailing are still not known. The stegosaurus, Woolworth's, and Sears were unable to adapt. Will Wal-Mart do better?

Weekend quick notes

Woolworths is the latest retailer to show an interest in India. The Australian giant is developing a deal with India's Tata Group to supply the group's retail outlets -- an opportunity for Woolies to study the market up-close. More on India here.

Home Depot has had a shake-up in its marketing ranks. Roger Adams is the new CMO -- the position has been vacant for a year. The exec-vp of merchanding & marketing is gone, as are a couple of other top folks.

Ahold's former marketing director has gone on trial for fraud. According to the government, he "booked whatever amount in income that they needed to make their targets."

Winn-Dixie looks like it will be out of bankruptcy soon. The question, as noted in the article, is whether they've figured out a way to compete with Wal-Mart. If not, how long before the next filing?