Littlewoods abandons high street store sell-off

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The Independent Online
Littlewoods yesterday abandoned plans to sell its high street stores business after failing to find a buyer at an acceptable price. Talks with Kingfisher, the Comet & B&Q retailer, broke down last week after Kingfisher objected to the pounds 500m asking price. Kingfisher had wanted to convert most of the 135 stores into branches of Woolworths.

The collapse of the sale plans has forced a strategic rethink by James Ross, the acting chief executive. Though he attempted to put a positive gloss on events yesterday, retail analysts said the failure to sell the high street chain left the company's strategy in tatters. "They are back to square one," said Clive Vaughan at Verdict Research. "It is not a driven strategy. They are reacting to events."

Littlewoods' plans to re-focus its business to concentrate more on home shopping could be further disrupted if the Monopolies and Mergers Commission blocks its pounds 367m deal to buy the Freemans mail order business from Sears. Mr Ross denied that there had been any U-turn. "We said home shopping was a core business and that is still the case. And we always said that there would be no fire sale of the high street stores. A radical new strategy for this division has been developed and I firmly believe this will transform the business."

Under that strategy Littlewoods will raise cash by selling up to 35 of its high street sites to leave the chain with 100 stores. Potential buyers could include Kingfisher, Boots and Tesco which had already agreed with Kingfisher to buy around 20 of the Littlewoods stores to convert into its Metro format.

The remaining 100 Littlewoods outlets will trade under a new format concentrating more on ladieswear targeted at women over 45.

The Berkertex brand will be developed and a trial of 10-12 stores trading under that name will start early next year. A Berkertex catalogue will be developed alongside the high street chain. The division will be "streamlined" in a move expected to include job losses. The chain stores division employs 6,500 full-time equivalents.

Mr Ross said that a de-merger of the retail businesses was possible. This would give the Moores family shareholders which control the group, one share in the home shopping business and another in the high street operation. Mr Ross said a flotation was still not on the agenda though this might be possible in three to five years.

The company also bolstered its management team yesterday when it named Barry Gibson as its new chief executive. Mr Gibson, 45, was previously retail director of BAA, the airports authority which runs UK airports such as Heathrow, Gatwick and Glasgow. Mr Gibson worked at Littlewoods for 10 years in the 1970s. Mr Ross will move from acting chief executive to non-executive chairman.

Littlewoods first announced in March that it was considering the possibility of selling its high street stores. But its initial price tag of pounds 600m proved unrealistic. Kingfisher proved the most interested but it is thought that it was deterred by the length of time it would have had to run the division as a going concern.