British retailer Woolworths starts closing-down sale after failing to find a buyer
12 Dec 2008
Woolworths Group, the owner of 815 stores across Britain, started a closing-down sale Thursday after failing to attract a bid that would save more than 30,000 jobs and avert the largest collapse of a British retail chain.
The stores, which sell products from DVDs to clothes and candy, were offering up to 50 per cent off the price of goods like greeting cards, attracting lines of shoppers seeking a bargain. Woolworths hired Deloitte as administrators last month after failing to find a buyer for the stores, the first of which opened in Liverpool, northwest England, in 1909.
Administration is a similar to bankruptcy: Administrators are appointed to salvage as much of the company as possible for the benefit of its creditors, a process that can involve trying to keep the business as a going concern or breaking it up and selling it off.
The latter prospect looks increasingly likely. Last week British entrepreneur Theo Paphitis walked away from talks with Deloitte, saying that it was likely a break up of the business would raise more cash for creditors of the retail stalwart. Talks involving Woolworths' former CEO Geoff Mulcahy and turnaround specialist David Buchler also appear to have hit snags.
Deloitte said Woolworths would try to clear as much merchandise as possible before Christmas. It said it was still trying to translate interest in the company's operations into a hard offer. But it insisted it was still hoping to keep the company together despite the fire sale. 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 stores.
"While we are still seeking bids from interested parties, Christmas is clearly the busiest time of the year for retailers and it is prudent to do all we can to sell existing stock."
Woolworths is the highest-profile victim of a consumer-spending slump that also has caused retailers from Ilva Furniture to the MK One fashion chain to fail in recent months. The retailer has been barely profitable for four years amid competition from supermarkets and online retailers.
Some outlets may shut before the end of the month if no purchaser is located, Deloitte said Wednesday. The retail chain went into administration on 27 November along with the EUK entertainment wholesale division. Talks are still in progress with a number of possible bidders, Deloitte said. (See: Woolworths on the verge of collapse / Collapsed retailer Woolies' stores to be sold off by Christmas)
Woolworths started offering discounts of as much as 50 per cent six days ago in an effort to clear inventory. The retailer traditionally makes all its annual profit in the second half of its fiscal year as shoppers purchase Christmas gifts. The company's Web site was not available Thursday, being replaced with a message that the site is "undergoing essential maintenance" and apologizing for "any inconvenience caused."
Woolworths is just a year shy of celebrating its centenary after opening its first store in Liverpool, northern England, in 1909. Known affectionately as "Woolies" in Britain, the store was known for years as a major value retailer. At the height of its success, a new store was opening every 17 days. But in recent years the company has struggled to remain relevant as supermarket chains expanded aggressively into its traditional business, selling everything from bed linen to toys and underwear.
The group reported a wider first-half loss on 17 September and scrapped its dividend. A "huge" turnaround would be needed to revive the company's fortunes, the CEO Steve Johnson said at the time. Johnson joined Woolworths on 1 September, a month after the retailer reported a slump in first half sales and said profitability deteriorated.
Woolworths has been hampered by debt that totaled £295 million as of 2 August, company filings show. GMAC, the financing unit of General Motors and Burdale Financial, part of Bank of Ireland, arranged £385 million of new borrowing facilities for Woolworths in January.
