Mulcahy digs in at Woolworths

Sir Geoff Mulcahy, chief executive of the Kingfisher retail chain, has ruled out selling any of the group's ailing Woolworths shops as part of his strategy to restore the group's fortunes.

Sir Geoff has been under pressure to offer some radical suggestions for both Woolworths and Comet after Kingfisher announced its first profits decline in its 13-year history in January. Comet reported a pounds 2m loss while profits at Woolworths fell by a third to pounds 51m.

Sir Geoff said: "We have sold stores before to people like Marks & Spencer, BhS and Burton, but selling chunks of stores would affect the economics of the group." He added that only half a dozen branches of Woolworths were loss-making.

Analysts do not see the economic benefit of retaining loss makers when supermarket groups such as Tesco have expressed interest in acquiring high street sites.

Sir Geoff has spent the last week talking to City analysts and institutional investors about his new strategy for Woolworths. The "seminars" are part of Kingfisher's new approach to investor relations intended to communicate more fully with the investment community. Seminars on Superdrug and the electricals businesses, Comet and Darty, are planned later this year.

However, many retail analysts declared themselves underwhelmed by Sir Geoff's plans to put the wonder back into Woolies. Hilary Monk of Verdict Research said: "There was nothing desperately new." Emma Burdett of Hoare Govett said the plans were logical but added that management had really only "bought themselves some time."

The grand plan for Woolworths is:

rTo return Wolworths to a value-for-money format after last year's mistakes when prices became uncompetitive.

rTo target young mothers on a budget as its core customers.

rTo segment the chain into three types depending on location and adapt the product ranges accordingly. The three groups are heartland stores in market towns where Woolworths is the largest shop; local shops in suburban areas; and city centres where the shops are against competition from rivals like Marks & Spencer and BhS.

rTo concentrate product ranges on the home and family.

Sir Geoff, who was demoted from chairman to chief executive as part of wholesale board and management changes earlier this year, defended the strategy.

"The real issues last year were operational rather than strategic. Woolworths lost its price competitiveness and suffered from stock availability problems," he said.

He added that progress in the first quarter, which showed that sales were ahead, proved that the strategy was on the right lines.

Investment Column, page 18

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