It’s not been a good 24 hours for Britain’s embattled retail sector. Last night the struggling Woolworths slumped into administration, putting thousands of jobs at risk – as did the ailing furniture retailer MFI. Not surprisingly, most consumers are unwilling to shell out on kitchens and bathrooms at the moment – B&Q owner Kingfisher admitted today that its like-for-like UK sales were down 9% last quarter. Meanwhile DSG International revealed that half-year sales were down 7% at Currys and 11% at PC World, plunging the combined group into the red. It never rains but it pours on the high street...
DSG (or Dixons, as we still like to call it) has never made a half-year loss in its history – but it’s done so in style now, posting a £30m pre-tax loss for the six months to October 24. This includes an £11m loss in the UK (where it made a profit of £14m last year). The retailer said big-ticket purchases like fridges were way down, while matching internet prices had squeezed margins (a problem that presumably isn’t going to go away). It still thinks it will finish the year in the black, but it’s decided to scrap its dividend; more bad news for shareholders, who have seen the stock plummet by 90% in the last two years.
The outlook was almost as gloomy at Kingfisher, which said today that its UK retail profits dropped nearly 20% last quarter. 'Consumer confidence has clearly been shaken over the last few months by international economic events,’ admitted CEO Ian Cheshire. Apparently trading is also deteriorating in China – although fortunately for Kingfisher, a strong showing in France and its other international locations helped to limit the damage.
No such luck for UK-based MFI and Woolworths, however. There was a certain inevitability about the collapse of Woolies, which has spent the last few months staggering under its £385m debt burden (while its shares have sunk to the price of a bag of cola bottles). The management were clearly worried about breaking the law (by trading while insolvent) and it seems that the various rescue deals being touted couldn’t happen quickly enough to avoid the retail business and distribution arm Entertainment UK slipping into administration (only 2entertain, its 40-60 DVD joint venture with the BBC, remains solvent). Its stores will stay open until Christmas, but probably not for long thereafter.
It’s true that Woolworths (like MFI) has long seemed a dog of a business. But its collapse will be costly – for the unfortunate 30,000 staff facing the axe, for the suppliers who provide it with goods, for the supermarkets who rely on it for DVDs, and for other struggling retailers who now face the prospect of competing with a Woolies fire-sale in the run-up to Christmas. And on top of all these dismal sales figures, it won’t do wonders for high street confidence...
In today's bulletin:
DSG and B&Q wobble as MFI and Woolworths collapse
Builders bounce as fall in house prices slows
Glass half-full for Britain's Most Admired
CFO of tomorrow is no monkey
MT's Little Ray of Sunshine: Stores bag green result