Woolworths to test child-only stores after losses worsen

Woolworths is testing the market for children-only stores in its latest attempt to fight back against fierce competition that saw its interim losses almost double to £66.3m. It also unveiled plans for 100 new stores over the next four years in a change of strategy that will see it focus on smaller high-street outlets.

The group has spotted a gap in the market for a children's toys-to-clothing chain in city centres. A new Argos-style catalogue, which it is launching next month with 10,000 products, will feature the sorts of larger toys it cannot stock in smaller outlets. "It will be the definitive catalogue for kids," Trevor Bish-Jones, the chief executive, said.

The retailer is seeking to develop a multichannel retail offering that will broaden the range of goods available to customers in even its most cramped stores. It has improved its website and installed internet kiosks in all of its 800-plus outlets so that shoppers can buy and order in-store and online.

It believes the new strategy gives it scope to open 100 new stores over the next four years as small as 2,500 sq ft and has identified 200 market towns and suburbs that currently lack a branch of Woolworths. As it expands into smaller outlets, the company will sell up to 24 of its biggest stores, which have costly leases, and increase the number of freeholds it owns.

The group wants to turn its high-street estate into a "collection point" for customers who do not want to wait at home for goods ordered over the internet to be delivered. Its decision to launch a catalogue follows a similar move by Tesco.

"Our unique selling point [with the new catalogue] will be that you can collect stuff in store. It's convenient and financially better. Most people have a life to get on with," Mr Bish-Jones said. He admitted that the group would initially incur extra costs to deliver customers' orders to its stores because it would have to use couriers rather than its own van network.

Woolworths is desperate to lift its sales, which fell 8.3 per cent on an underlying basis in the first half. A poor music schedule, the hot weather and the World Cup, which distracted shoppers, all hit its sales. Since its second half began, the trend has improved a little, with like-for-like sales down by 3.5 per cent.

Mr Bish-Jones ruled out spinning off Woolworths' entertainment wholesale and publishing businesses, 2entertain and EUK, until at least 2008 while he built up both divisions. In the six months to 29 July, the group made an underlying loss of £66.8m, up from £36.2m the previous year. It raised its dividend by 5 per cent to 0.43p.

So far the company has opened three children-only stores, called Woolworths Kids +, in Northampton, Burton and Telford. A fourth will follow shortly in Burford in Oxfordshire.