Woolies shocks as sales slide

WOOLWORTHS has shocked the retail sector after the newly-independent group admitted it had missed out on the Christmas spending boom and that profits will be sharply lower this year.

The shares tumbled 14% to 37 1/4p as chairman Gerald Corbett, the former Railtrack boss, said Christmas trading had been slower than expected and like-for-like sales at the 790-strong chain had fallen by 3.5% in the nine weeks to 5 January. Together with higher-than-expected costs of clearing excess stocks, this would have 'a material impact' on profits for the year to 2 February, he warned.

Analysts, who had already downgraded their expectations since the company was demerged from parent Kingfisher four months ago, slashed their figures again. Forecasts had been around £45m but have now been cut to as little as £15m.

Corbett said sales of Christmas products such as gifts and confectionery had been slower than expected and that Woolworths had lost market share in entertainment, as well as suffering from the slump in mobile phone sales. But the group is on course to achieve its debt-reduction and stock-clearance targets and he is confident of a 'significant improvement' next year.

Leading that recovery will be 41-year-old Trevor Bish-Jones, who has been recruited from Currys, part of the Dixons group, to be Woolworths' new chief executive. He is to be paid £375,000 a year, the same as Corbett, who also received a £500,000 bonus from Kingfisher for seeing through the demerger. Corbett will switch to a part-time role later this year, and his salary is likely to be cut to around £125,000 for a two-day week.

Another High Street name to miss out on the spending boom was Mothercare, where the continuing warehouse crisis caused a severe slump in Christmas sales, forcing the baby products retailer to issue its third profits warning in four months.

Like-for-like sales fell 4% in the 13 weeks to 11 January and 5.9% overall, due to the failure to shift stock through its crippled warehouse at Daventry, Northamptonshire.

Chief executive Chris Martin said toy sales, which account for a quarter of the group's turnover at Christmas compared with 11% at other times, were hit particularly hard. He said some toy makers stopped supplying Mothercare, choosing to send the goods to its competitors once the extent of the problems became clear.

Sales of the group's autumn-winter clothing range, which is at the heart of Mothercare's recovery strategy, showed 'positive growth' but small falls were recorded in home and travel products. Mothercare's plight has been made worse by the need to set up a temporary warehouse at an annual cost of £3m. It hopes to close this when the problems at Daventry are resolved.

Martin said pre-tax profit for the year to 31 March was now unlikely to exceed £4m. Analysts had been forecasting a £15m result in October but cut their estimates to £9m when news of the warehouse disaster emerged.