Administrator Deloitte has admitted defeat in its bid to find a buyer for the ailing Woolies – in fact, it said on Wednesday that it had ‘not come close’ to uncovering a decent offer for the whole business, despite high-profile interest from the likes of Theo Paphitis. As a result, it .has no choice but to start closing stores: barring a last-minute miracle, the first batch will be selling their last pic’n’mix on December 27, while the rest will be shuttered for the final time over the course of the following week. So after 99 years on British high streets, the famous Woolworths brand could be no more in a month's time – and 27,000 staff will be out of a job. Not exactly the most uplifting of Christmas tales...
Deloitte said some buyers were still showing interest in parts of the business, even though nobody’s come forward to bid for the whole lot (which is hardly a surprise – if the model didn’t work last year, it’s hard to see how it will work next year). The high street leases will be the most highly sought-after – apparently the supermarkets and value retailers are queuing up to take these off the administrator’s hands, and Deloitte has promised to put soon-to-be-redundant staff in touch with the new owners as and when the sales go through (and 300 are apparently imminent).
However, it’s clear that there will be lots of people out of a job. And it also seems pretty clear that Deloitte won’t be able to raise enough money to pay off Woolies’ huge debt pile even if it does manage to flog all its assets, which means that creditors are going to be left out of pocket too. Plus of course its rapid demise has been devastating to its corporate customers: Woolies’ distribution arm EUK provided about 30% of all the CDs sold in the UK, so music retailers like Zavvi have been left high and dry.
And although bargain hunters will be happy – shoppers flocked to Woolies this weekend as the retailer began a closing-down sale, and the discounts are likely to get even bigger during the chain’s death throes - this will put awful pressure on rival retailers’ pricing. And that's clearly the last thing they need at the moment. Amid rumours that last week’s high street sales were absolutely dismal, the CBI said this morning that 67% of retailers reported lower sales than last year in the first half of December, the worst result since its survey began in 1983. Big discounts like this will only encourage customers to hang on for further discounts, which is going to hammer margins across the board.
In other words, it’s carnage on the high street – and Woolies now looks almost certain to be highest-profile victim so far...
In today's bulletin:
Jaguar and Land Rover seek £1bn bail-out
BA and Qantas abandon £4bn merger talks
SVG cash-call highlights private equity woes
Employers rage as Working Time opt-out abolished
Woolworths to close for good as high street woes mount