Woolies' sales decline deepens

THE sales decline at Woolworths is gathering pace, the High Street retail chain revealed today, sparking fresh concern for the group's prospects in the wake of terminated takeover talks with Apax Partners in April.

Speaking ahead of today's annual shareholder meeting, chairman Gerald Corbett said the outlook for consumer spending remained 'challenging' and current trading was 'difficult'. Woolworths said like-for-like sales were 4.4% down in its main stores in the 18 weeks to 4 June.

Woolworths is not the only High Street retailer under pressure. Figures from the British Retail Consortium overnight reveal that retail sales in May were down 2.4% on a year ago, despite a flood of discounting to attract shoppers. But Woolies is losing out to the likes of Tesco, which is forging ahead with its non-food business and competing hard in sales of music, videos, books and games.

Woolworths blamed a comparatively poor release schedule for sales of these entertainment products and said that it was taking action to limit the damage to margins. The space allocated to higher-margin goods has been increased within its stores and a comprehensive refurbishment programme of its stores continues apace.

The company said 11 stores converted so far this year have met sales targets. A further 50 are to be converted to the new format.

Elsewhere, Woolworths recently secured a contract to supply supermarkets group Morrisons with music, video and games chart products. And 2entertain, the group's 40%-owned entertainment publishing joint venture with BBC Worldwide, met forecasts.

Woolworths said it continued to sell its out-of-town retail sites which formerly traded as Woolworths big W. The company has also concluded a review of its financial needs in the wake of the ending of takeover talks with the private equity group Apax Partners. Although investors are keen to see a return of cash and would have seen one had the Apax bid for Woolies succeeded, Corbett ruled out any likelihood of a special dividend or other payout.

'The group needs to maintain the financial capability to fund the seasonal build up in working capital ahead of the peak Christmas period,' he said.

Woolworths shares fell ½p to 34p in early trading.