Woolies to face tough ride after demerger

Shares in Woolworths, the retailer being demerged from Kingfisher, will be priced below initial expectations when they begin to trade next week, according to spread-betting firms and fund managers.

Cantor Index, which runs a grey market in Woolworths stock, yesterday set a price of between 25p to 27p a share, having come down from an initial price of between 34p to 37p over the past three weeks.

UBS Warburg, an adviser on the demerger, had last month estimated a fair value of between 30p to 40p a share for Woolworths, or £400m to £550m.

At 25p a share, the retailer would be worth only £350m, despite annual sales of £2.5bn. Woolworths' advisers will decide the level at which shares will begin to trade on 28 August.

David Buik, of Cantor, said: "Punters are concerned that until it produces a chief executive who can change Woolworths, it has nowhere to go. We have seen nothing but sellers."

Woolworths, which is chaired by Gerald Corbett, does not expect to appoint a chief executive until next year.

Simon Shaw, a fund manager at Clerical Medical, said Woolworths shares would suffer from both technical factors and its operational difficulties, including its overstocking problem. He said many investors in the FTSE 100-listed Kingfisher would not want to hold shares in a mid-cap retailer such as Woolworths.

Andrew Kelly, of Scottish Value Management, said investors had shown little interest in Woolworths. He said: "It's not an obvious growth play in the retail sector. It's difficult to see how things could change there without a chief executive."