Price war adds to Ottakar's festive gloom

The "unprecedented" pre-Christmas book price war has added to Ottakar's woes just days after its future was thrust into limbo. Analysts halved their profits forecasts for the bookseller yesterday after it warned it was haemorrhaging sales.

The culprits are Ottakar's bigger rivals, who can afford to follow the lead set by the supermarkets and slash the price of sure-fire festive bestsellers to lure shoppers into their stores. Virtually every Christmas hardback is available for half the recommended cover price in Books Etc, WH Smith and Waterstone's.

Ottakar's said the amount of discounting in the past four weeks had hit "unprecedented levels", knocking its like-for-like sales in the past 19 weeks down by 6.7 per cent. Shares in the group, which must wait until May to learn whether the competition watchdog will allow HMV's Waterstone's to proceed with a takeover bid, fell 7.5p to 357.5p. Numis Securities halved its profits forecast for the year to January 2006 to £2.9m.

Michael Hitchcock, the finance director, said Ottakar's was too small to fight back by slashing its own prices. "We don't have the size or the scale to put a campaign on national television or in the press and there is no point dropping our prices if no one will know about it."

Had the Office of Fair Trading not blocked HMV's bid, Ottakar's 137 stores would have joined Waterstone's 194 to create the country's biggest book chain. Alan Giles, HMV's chief executive, insisted he would fight Waterstone's case with the Competition Commission, but his bid has lapsed and he is under no obligation to launch a new one, even with a green light in May.

Ottakar's said the two approaches it has received, including one from its founder James Heneage, had cost it £2m so far, which it will take as an exceptional cost. Mr Heneage's bidding vehicle offered 400p per share to take the company private, but HMV topped that with an extra 50p per share.

Ottakar's said sales and margins were both under "pressure". The group had a poor Christmas last year, issuing a profits warning in early January.

Tim Waterstone, who founded Waterstone's, said: "There is too much discounting going on. It's completely unnecessary and not in the public interest."