Woolies blames World Cup for summer sales own goal

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The Independent Online

Woolworths will enter its crucial Christmas trading period under immense pressure after its like-for-like sales slumped by almost 8 per cent.

Trevor Bish-Jones, the chief executive, insisted the group could make up for the shortfall in its second half and hit its goal of flat underlying sales.

But not all analysts were convinced. "We've been let down before," one said. Based on the drop in interim sales, Numis Securities sliced its pre-tax profit forecast by a fifth, while Credit Suisse First Boston cut its one by 12.5 per cent to £28m from £32.5m. Cazenove, the group's joint broker, trimmed its expectations by £3m to £42m.

The 7.7 per cent fall in lke-for-like sales during the 25 weeks to 22 July represented a worsening trend and followed a 6.7 per cent drop in sales during the first 19 weeks of the group's half. Woolworths is still sticking to its goal of improving its gross margin by 100 basis points on the back of improvements it has made to its supply chain.

Mr Bish-Jones said he "refused to go through a laundry list of excuses" for the drop in sales. The group was one of the World Cup losers, lacking footfall during the tournament and suffering from a weak entertainment release schedule. To exacerbate its woes, Woolworths does badly when the weather is very hot because it mainly sells products to amuse people indoors.

The retailer, which has more than 800 high street stores, hopes that a new multichannel sales strategy that allows customers to pick up internet orders in store if they do not want to wait in for home delivery will rescue its second half. The new service will be ready from next month and is being pitched as the answer to its hundreds of small stores which lack the space for a full range. "It will give them elastic walls," Mr Bish-Jones said.

Woolworths is also expanding its Ladybird clothing brand by building 92 separate areas within its outlets to create the feel of a "shop within a shop". Mr Bish-Jones said: "Do I think people are flush with cash? No. Will our performance improve? Yes. By how much is difficult to predict because we don't know what the new services will do for the business."

The group's EUK music and books distribution business, which is attempting to replace the contract it lost with Tesco, said third-party sales were up 10.7 per cent. Its growth rate has slowed from earlier in the year because of the tough comparisons with last year when there was a new Harry Potter book.

Football winners and losers

WINNERS

* Kesa Electricals Demand for flat-panel TVs lifted like-for-like sales by 8.6 per cent at Comet.

* Domino's Pizza Like-for-like sales climbed 8.3 per cent.

* J Sainsbury A sponsor of the tournament, it credited the football as one of the main factors behind its 5.7 per cent like-for-like sales growth.

* McDonald's Another sponsor, it had its strongest quarter in Europe for more than a decade.

LOSERS

* GCap Said there was less advertising because the World Cup was responsible for a 14 per cent slump in July revenues. Analysts sliced their forecasts.

* ITV Advertising revenues slumped because companies opted not to pay inflated prices for slots between the games.

* 888 Punters bet on the football rather than play its online poker and casino games.

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