No celebrations for Woolworths' century of managed decline
Sunday 24 August 2008
In 1909, when the American owners of Woolworths opened their first British store in Liverpool, the local newspaper, The Liverpool Courier, reported long queues outside, with shelves stripped bare of their goods before the first day of trading.
For "five generations" the company claimed to have put itself at the heart of the high street, pioneering "great value on a range that is always changing". It was a claim that had some merit. The 1960s proved to be halcyon days for Woolworths, which could boast more than 1,000 stores across the UK.
A 1963 Daily Express share-tipping booklet described the company as "truly a giant" in shopping; it was at the time the most prominent retailer on the UK stock market. But the financial turbulence of the Seventies put the brakes on its growth, which was checked by a programme of rationalisation. Since then, Woolworths' course has largely been one of managed decline as the British consumers' love affair with its stores – best known for their pick and mix sweet counter – gradually came to an end.
In 1982 the company was sold to Paternoster Stores, a forerunner to the Kingfisher group. The new management attempted to give greater definition to its offering in four key areas – entertainment, home, children's toys and clothing – and confectionery.
Woolworths continued to struggle through the 1990s, although there looked to be light at the end of the tunnel when Kingfisher revealed plans to merge with the supermarket chain Asda. However, that tie-up was scuppered when Kingfisher was gazumped by the American retail giant Wal-Mart. The failure to win Asda forced Kingfisher to spin off its general merchandise business, resulting in the sale of Superdrug and the flotation of Woolies once again.
A heavyweight management team, chaired by Gerald Corbett, the former boss of Railtrack, and with Trevor Bish-Jones as chief executive, took over the reins of the listed company in August 2001.
Shares floated at just over 30p, initially climbing to more than 50p in the following year. Today they sit at less than 7p after a catalogue of problems at the retailer.
In December 2005, as competition from online rivals such as Amazon became ever more intense, Woolworths issued a profits warning. More would follow in the years to come.
In January this year, the company was forced to shore up its balance sheet, taking a £300m asset-based loan from the Bank of Ireland-owned group Burdale. In June it was revealed that Mr Bish-Jones was leaving, ousted following a review by Woolworths' chairman, Richard North. Steve Johnson, the man behind the Focus DIY chain, will be joining next month, lured in with a £9m-plus incentive package.
He may not have come cheap, but the City's response to his appointment has been lukewarm. "It's hard to understand what Steve Johnson can do that Trevor [Bish-Jones] hasn't already been doing," says Sanjay Vidyarthi, an analyst at Dresdner Kleinwort.
In the next few months we may find out what Mr Johnson has planned: that depends on Iceland's Malcolm Walker.
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