The wonder deserts Woolies as sales plunge

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The Independent Online

Woolworths yesterday admitted trading was falling well below expectations and Christmas was coming worryingly late - despite starting its advertising blitz in November.

This year Woolworths' has spent huge amounts on an advertising campaign that even supportive analysts describe as "horrible" as it promotes its "Big Red Book" catalogue and Christmas offers.

But while the campaign's irritating nature has high marks from the trade press in terms of name recognition, it has not yet persuaded consumers into the shops.

The company yesterday issued a profits warning as a result of a marked fall in footfall and sales in October and November.

Chief executive Trevor Jones said that Woolworths needed to see a sharp rise in sales over the next few weeks for profits to even meet the lower end of City forecasts.

While Christmas is highly important to most stores, it is crucial to Woolworths, which makes nearly all its retail profits in the six-week run-up to December 25.

But sales were down 6.5 per cent in the last couple of months and Mr Jones admitted: "It does seem Christmas is coming late this year."

Analysts, at least, believe the problem is not just specific to Woolworths. For a start, there is an extra shopping weekend before the big day this year, and that could be persuading shoppers to start late.

Increasing numbers of consumers are also beginning to reign in spending as they struggle to meet debt repayments.

Others point to the unseasonably mild weather that has continued into December. That has not only hit sales of winter clothes badly, it has also meant that consumers have not really been in a "Christmas" frame of mind.

Finally, sales of entertainment products have been badly hit by the internet.

Mr Jones said that despite yesterday's profits warning - the second in a year - there were still encouraging signs at this perennial problem child of the high street.

"In those areas where I have a handle on market share, we are holding up," he said.

"Since we launched the Big Red Book [catalogue] on October 17, multichannel sales have increased by 160 per cent on last year and now account for 7.5 per cent of our sales. Sales of toys are still very strong."

Does he have a point?

To many, Woolworths' continued existence is a surprise. In the US, for example, from where the company's parent sprang, the name no longer exists. In the last 1990s downturn Woolworths became the ultra trendy Footlocker

However, while such a reinvention appears beyond Woolworths in the UK, Robert Brent, retail analyst, at KBC Peel Hunt said that the company could still look much healthier in a year's time, as the Big Red Book begins to pay off and other reforms bear fruit.

"Management at Woolworths are doing a phenomenal job in turning around a shocking business that was very badly run by Kingfisher.

"They have repositioned Woolworths to focus on kids and entertainment. They have become the number two retailer of computer games, for example, from nowhere. That will be very big next year with the new games consoles."

However, while bid speculation continues to swirl around the stock, with regular rumours of interest from private equity firms, Mr Brent does not expect a pick up in the shares anytime soon.

"Woolworths is a Christmas stock and that means the shares are dead money for the next 12 months."

A high street icon

Woolies' top Christmas sellers:

Deal or No Deal electronic game

Bratz Forever Diamondz

Cars Fast Talkin' McQueen

Turbo Tail Tigger

Pirates of the Caribbean Black Pearl Ship

Sindy - Hot Pink Mini

Waddingtons' Wooden Backgammon Set

Dr Who Cyberman Voice Changer

Electronic Monopoly

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