Retail performs better than expected

Variety store group Woolworths made a half-year pre-tax loss ofÂŁ64.7 million, before exceptionals, compared with a loss ofÂŁ73.6 million the previous year and its core retail arm performed better than expected.

Half year like-for-like sales rose just 0.6 per cent, with group sales from continuing operations up 16.1 per cent to£1.14 billion in the 26 weeks to August 4. Woolworths’ retail division made an operating loss of£47.7 million compared with£64.5 million the previous year, boosted by growth in the entertainment sector including books and computer games.

Woolworths chief executive Trevor Bish-Jones said the results were “encouraging”, but remained cautious about Christmas. He said customer confidence would be lower than last year, following the Northern Rock banking crisis and interest rate rises. However, he added that spending on children was likely to hold up given past experience.

Seymour Pierce analyst Richard Ratner said: “No surprises, with retail doing better partly as a result of the summer weather working in its favour, but EUK [Woolworths entertainment, wholesaling and publishing division] down because of set up costs for new clients and integration of new contracts impairing efficiencies. So far so good, and the problems at EUK should be out of the way during the second half, but one must remember that retail did well in the second half last year and also benefited by£5.8 million from the change in depreciation.”

Bish-Jones said that next year the group aimed to build on its market share growth. When asked about a potential break-up of the business, he said: “We have to be financially stable to consider it. Woolworths retail made a loss last year so, until we’re in profit, we won’t be considering it.”

Separately, Greenpeace is to stage a protest at the headquarters of Woolworths in London today.

The environmental group claims that a recent policy announcement made by Woolworths, concerning the phase out of high energy light bulbs, is “weak”, and does not comply with the Government’s initiative to get such bulbs off the shelves by 2012.

Topics