A mountain of unsold CDs and videos worth £20m has pushed Woolworths deep into the red in its first year as an independent company.
Woolworths, which was demerged from the Kingfisher retail group in August, has been forced to write-off the value of more than 2 million albums that were three years old. They had been cluttering up the stores' stockrooms, making it difficult for the retailer to make room for new material.
The company was forced to send much of the stock back to suppliers while writing off £11.5m on the value of the rest.
Woolworths said the problem had arisen due to changes made in the stock management systems three years ago, when the business was still owned by Kingfisher.
Gerald Corbett, its chairman, said: "There's not much point in blaming anyone. We've dealt with it and we're moving forward." He added that the problem was "symptomatic of the instability when the demerger was taking place."
The write-off was part of a total of £72m of exceptional charges which pushed Woolworths into a £46.4m loss for the year to 3 February. Other charges included a £26.7m write-down for the value of the group's Streets Online internet music division which made a £9m loss last year. There was a £12m charge for the closure of e-Woolworths, the group's main e-commerce channel.
The 900 Woolworths stores saw profits slide to £25m compared with £79m the previous year as they lost market share to rivals such as the supermarket groups. Trading has got off to a "reasonable start" in current trading, the group said, with like-for-like sales up 6.2 per cent. The group denied any problems with Easter eggs saying there were no stock shortages.
Trevor Bish-Jones, the recently appointed chief executive, said he would now embark on a strategic review to determine Woolworths' future direction. He wants to make clear what Woolworths stands for, while reviewing store formats and enhancing internal systems. "People say we sell a little bit of everything but we have got to be famous for something," he said.
The shares jumped 8p to 46.25p, close to their highest point since the demerger.
Expansion of the Woolworths General Store format has been put on hold while the group organises a new supplier of its health and beauty ranges.
Mr Corbett, the former head of Railtrack, will step back to a part-time role in May. He has waived his bonus of £187,000.
Woolworths is reviewing whether to close its final salary pension scheme to new entrants but will maintain it for existing staff.Reuse content