Woolworths in black economic empowerment deal

Woolworths is to sell a 10% stake in the company in a black economic empowerment (BEE) deal worth 292m rand (£21m) in Africa. The fashion and homeware firm said the move recognised the "social and economic imperative" of BEE. Woolworths is just the latest South African firm to enter a BEE deal under direction from the government.

BEE is meant to correct apartheid-era inequalities by making businesses transfer stakes to black-led groups. Yet it has been accused of benefiting a small group of wealthy black investors, with many of the biggest deals so far having gone to businesses whose members include people with links to the ruling African National Congress.

South African Finance Minister Trevor Manuel admitted last month that the BEE programme needed to be reviewed to ensure it worked more effectively. Some 90% of Woolworths' employees are black, of whom 85% are woman. The firm is not connected to the separate US and UK companies of the same name.

www.woolworths.com
21 May 2007

Baugur criticises Woolworth management

Icelandic investment group Baugur openly criticised Woolworth's management on Tuesday. Baugur is the flailing retailer's largest shareholder. The investment group's chief executive Jon Asgeir Johannesson told the FT that Woolworth's should stop investing money in struggling stores and that management, which includes chief executive Trevor Bish-Jones, should “get their act together”. Bish-Jones, who became chief executive five years ago, has spent a great deal on refurbishing some of the retailer's 800 stores. According to Johannesson, he did so at a time when the company was facing dwindeling sales and losing money. “It does not make sense to spend on the stores…we have expressed this view,” he said.

Woolworth's board will soon see its chairman Gerald Corbett replaced by Richard North, the former chief executive of Intercontinental Hotels Group. The board are hoping that his arrival will bring about a positive change. It is, however, likely that he will not be making any big changes – such as a demerger of the group's wholesale and retail divisions – immediately. According to the newspaper, North is hoping that discount prices for apparel, stationery and general products will attract customers the retailer has lost. Woolworth's could not be reached for comment.

www.woolworths.co.uk
11 April 2007

Woolworths issues profit warning

General merchandiser Woolworths surprised the high street earlier this week by issuing a profit warning for the holiday season. The retailer warned that full-year profits could drop to half of what they were last year if sales did not improve in the last three weeks of the year. “Given that Christmas falls on a Monday this year, there will be an extra weekend for shopping which may result in retail sales falling later than usual,” the company said in statement. “However, given the sales performance of the last two months, it is appropriate to be cautious.” Shares plunged 12 percent at the news as shareholders tried to unload stock.

Chief executive Trevor Bish-Jones said like-for-like sales had dropped 6.5 percent in the last 18 weeks. Even a stellar performance of the chain's online site could not compensate for slow sales of Christmas products and entertainment. He defended the results by saying that he believed other retailers were also under pressure, although he refused to name names. However, following the announcement, shares in books and music retailers HMV and WH Smith fell 4 percent and 1 percent respectively. Bish-Jones added that he would not be cutting prices, because “it just burns margins and doesn't drive underlying profitability.” Cazenove, Woolworth's banker, yesterday adjusted its pre-tax profit forecast by 44 percent down to £22.5 million.

The profits warning triggered speculation that Baugur, the Icelandic retail group which owns 10 percent of Woolworths, would initiate a restructuring plan for the chain next year. Baugur has been contemplating reducing the 800-store chain and separating the two entertainment divisions. According to analyst Richard Ratner at Seymour Pierce, the profit warning is particularly unusual for this late in the year and he does not believe the chain will readily recover next year.

www.woolworths.co.uk
6 December 2006

Woolworths sees losses

High street retailer Woolworths is expected this week to unveil losses of close to £70m for the first half of the year, one of its poorest ever performances. The results, which reflect weak sales and the high cost of recent refurbishment, are bound to spark renewed calls from shareholders for radical corporate surgery, including the possibility of a break-up. Icelandic investor Baugur, which controls 10 per cent of the company, has already called for a massive sell-off of stores, but other shareholders would prefer management under chief executive Trevor Bish-Jones to revamp the company by selling or sub-letting outlets as part of a streamlining operation. Bish-Jones is working on a review of the group's 800-store property portfolio and according to sources, the review is at an advanced stage and details could be announced when Woolworths publishes its results on Wednesday. The plan could see up to 30 larger stores in expensive shopping centres or high streets closed and replaced by dozens of smaller stores in cheaper locations.

Woolworths recently began the roll-out of in-store internet kiosks, which allow customers to order the full Woolworths range - even in the group's smallest stores. Bish-Jones has denied reports that he has spoken to Baugur about working together on plans to break up the group. Reports suggested that Baugur wanted to sell the group's media businesses, which accounted for the majority of profits last year. Bish-Jones said he would look at spinning off DVD publisher 2entertain, which owns a back catalogue including the hit BBC series Little Britain. But he added that an option to buy out joint venture partner BBC Worldwide did not kick in until 2008.

www.woolworths.co.uk
17 September 2006

Icelandic investors acquire Woolworths stake

Mystery Icelandic investors have built a 2.5 per cent stake in Woolworths which is also being stalked by Baugur. Baugur announced last month that it had acquired a 6 per cent stake in Woolworths and has since increased its stake to 8 per cent. The mystery investors acquired the shares ahead of Baugur's announcement through Kaupthing, the Icelandic bank.

The stake building by the Kaupthing clients was uncovered by Woolworths using the company's act. Under the act companies or individuals holding stock in a firm must confirm the identity of beneficial owners if served with a so called 212 notice. Woolworths served several 212 notices on several Icelandic banks and investors in January after reports that potential bidders were building a stake. In early February, Kaupthing informed Woolworths that 42 clients owned 36.7 m shares. The majority of the unnamed clients are based in Iceland.

6 March 2006

Baugur builds stake in Woolworths

Icelandic retail investor Baugur announced today that it has built a 7 percent stake in general retailer Woolworths. According to a report in the The Times Baugur is expected to disclose that it is Woolworths' biggest shareholder with a stake valued at £36 million. Baugur, which owns fashion chains Oasis, Karen Millen, Jane Norman and MK One and also owns a 13.7 percent stake in fashion retailer French Connection, is said to embark on buying sprees before launching bids for companies. The company made large profits by buying and then selling its stakes in retailers such as Selfridges, House of Fraser, Mothercare and JJB Sports.

Baugur's chief executive Jon Asgeir Johannesson has said that he is still on the lookout for acquisitions in the UK, although he was supposedly focusing increasingly on property. Johannesson recently said that Woolworths was “good value at these prices”. Sources told The Times that his board had still not reached a unanimous decision to make a bid for Woolworths.

www.woolworths.co.uk
9 February 2006

Woolworths losses increase

High street retailer Woolworths last week revealed that underlying losses in the first half had increased and warned that a difficult retail climate could further have further negative effects on the business. Losses in the six month period increased by £3 million to £35.9 million, while same-store sales at the core chain dropped by 1.7 percent in the two months since the last trading update.

Although the holiday season is usually Woolworths' busiest time, it said that it anticipates a continuing tough retail climate. The group has taken steps in a bid to encourage consumers to spend, including the improvement of its prices and the lowering of its costs by reducing the amount of packaging used on products.

www.woolworths.co.uk
26 September 2005

The temptation of Bish-Jones

The chief executive of high street retailer Woolworths, Trevor Bish-Jones, has been offered a £2 million incentive to stay on at the company, according to reports by the FT. The package deal includes a guaranteed £480,000 bonus for staying on for three more years.

Chairman Gerald Corbett said: “Trevor Bish-Jones is a highly regarded retailer. We feel that it is crucial to retain him.” The company is keen to keep Bish-Jones, who joined the firm in 2002. It is thought that he was offered the package as compensation for Apax Partners' withdrawal of its offer in April, which would have resulted in a pay-out for Bish-Jones of £1.63 million. The extravagant offer comes at an inopportune time for the company, in the wake of 100 firings at the head office and frozen pay. An observer told the FT that this package would certainly not boost morale.

www.woolworths.co.uk
8 August 2005

Woolworths announces sale MVC

High street retailer Woolworths has announced the sale of the struggling MVC, its CD and DVD chain. MVC was purchased by a group of private equity investors, led by Argyll Partners, for £5.5 million. Woolworths will receive an additional £5 to £10 million due to a reduction in working capital. However, the company did warn that the sales would lead to an exceptional loss of approximately £34 million this year.

“The disposal of MVC removes a loss making business from the group and allows us to be solely focused on our retail businesss in Woolworths,” said chief executive Trevor Bish-Jones. “I don't think it's the worst deal we've ever done.” With this sale Woolworths can focus on expanding its range of entertainment products without fear of infringing upon sales of nearby MVC stores.

www.woolworths.co.uk
2 August 2005

Woolworths trade suffers following attacks

Chief executive of Woolworths, Trevor Bish-Jones said on Monday that the company's stores in big cities across the UK had seen a drop in trade since the terrorist attacks of 7 July. Underlying sales had dropped 4.4 percent in the 24 weeks to 16 July.

“It wasn't helpful,” he said of the attacks. “You can see the effect in the numbers and we are certainly seeing more effect in large city conurbations. Business in rural areas was certainly less impacted.” Bish-Jones said that he expected the downturn from the attacks to be temporary. “It is not the easiest retail period. We are comfortable about how we are performing.”

Last year, Woolworths made £73.9 million. Consensus for pre-tax profit for this year is down at £62 million. Meanwhile, however, Woolworth's wholesale subsidiary Entertainment UK, which distributes books, CDs and DVDs for supermarkets including Tesco, saw sales rise 16.1 percent. The launch of the sixth Harry Potter book appears to have helped. Entertainment UK 's performance appears to be a small bonus, although analysts are disappointed in the main chain's figures.