Woolworths takes £4m online hit

Woolworths has admitted its big push online had cost it £4m but claimed the move had set it up well to compete with the likes of Argos.

The retailer had to pay couriers to deliver customers' orders due to heavier demand than it anticipated - one of the factors behind the profit warning it issued at the start of December.

Yesterday the company said that like-for-like sales fell by 4.6 per cent in the six weeks to 13 January. This followed a 6.5 per cent fall on the same basis in October and November. Margins fared better, however, and it expects selling margins for the full year to rise by 100 basis points.

The trading update came as the group unveiled the £29m acquisition of the books wholesaler Bertram to bolster its Entertainment UK (EUK) wholesale arm.

Trevor Bish-Jones, the chief executive, said its new multi-channel strategy, which comprised launching a catalogue, improving its website and giving customers the chance to order goods either for home delivery or for store collection, had produced order volumes that were four times higher than forecast.

It racked up the additional delivery costs because the average transaction values were lower than it expected and it lacked the capacity to deliver orders via its existing distribution network. It said the costs would not recur next Christmas.

The group took £10m of sales - or 9 per cent of its revenues during its peak period - either online or via its new catalogue, which is called The Big Red Book. "You don't do £10m of sales on a new concept unless customers like it. We have established a good base on which to build," Mr Bish-Jones said. He predicted sales would "grow strongly" because the group lacked the stock to fulfil some orders on key items such as some Bob the Builder toys over Christmas.

In a dig at Argos, Mr Bish-Jones said he had allowed himself a "wry smile" at his rival's claims that it had protected its margins at the expense of its sales. "My view is that Argos were very aggressive on toys in December." He said Woolworths took market share in toys, which were featured heavily in its catalogue, over Christmas.

Analysts left their profit forecasts unchanged. They had cut them from around £46m to £21m after the pre-Christmas warning.

Woolworths also said the collapse of Music Zone, the CD chain, cost EUK between £2m and £4m. The division's sales rose by 24.2 per cent during the six-week period and it expects a "satisfactory" trading profit. 2entertain, its joint venture with BBC Worldwide, reported trading in line.

Internet shopping hits fresh high

Internet-based retailers cleaned up over Christmas after spending online surged by 54 per cent to £7.7bn during the period, beating expectations.

In two years, the amount of goods bought over the web has more than doubled, reflecting a push by high street chains to improve their online presence. In the 10 weeks to Christmas Eve, internet sales hit £7.7bn, up from £5bn during the same period the previous year, according to Interactive Media in Retail Group.

Shoppers spent £1bn a week in the first three weeks of December, beating the IMRG's forecasts.