Woolworths losses put damper on Kingfisher: Price cuts to clear computer games and toys push retailer into the red

PRICE-CUTTING to clear excess stocks of toys and computer games pushed Woolworths, the high street retail chain, into the red and led to a disappointing first half for Kingfisher, its parent.

Alan Smith, chief executive, said the problem was partly that Woolworths had been concentrating too much on promotions and special offers and had neglected its core range. Some of the promotions were not successful and the group was left with excess stocks that had to be reduced in price to clear them.

In the first half, the write-off was pounds 57m, mainly of toys and computer games. It bought too many of these ahead of the Christmas trading period, but sales - particularly of computer games - proved disappointing.

Sales at Woolworths dropped 1.2 per cent to pounds 508m but the cost of clearing stock, together with pounds 1.7m for redundancies and pounds 3.5m extra depreciation, meant it lost pounds 6.9m compared with a pounds 2.1m operating profit last time. Its dependence on Christmas trading means the first half has traditionally been weak.

Woolworths' losses saw pre-tax profits at Kingfisher rise only pounds 6.1m to pounds 88.1m in the six months to July. That was despite a pounds 19.6m increase in the contribution from Darty, the French retailer acquired in May 1993.

Sir Geoff Mulcahy, Kingfisher's chairman, admitted that the results were 'less than satisfactory. I remain cautious about the UK retail markets, which continue to be highly competitive,' he said. His comments prompted analysts to downgrade forecasts for pre-tax profits by about pounds 20m to pounds 300m for the full year.

Kingfisher used the results presentation to set out its strategy and try to allay doubts about its performance and prospects, following its launch of an every-day low-pricing strategy, under which it aimed to offer consistent low prices to boost sales. Mr Smith said there had 'rarely been so many definitions, or so much confusion' about a retail strategy. The constant price-cutting by some businesses had confused customers, and the aim now was to offer consistent value. Service and range would remain a key part of the retail offer.

Kingfisher admitted, however, that it would take time to establish value in the mind of customers used to special promotions. The strategy is already being implemented in refurbished Comet stores - four were completed by the period end - and B&Q, with encouraging results.

Despite that, Comet slipped into loss in the first half, losing pounds 1.7m compared with a pounds 700,000 profit last time. Like-for-like sales dropped 6.7 per cent to pounds 211.3m.

Sir Geoff attributed that to fierce competition in the electrical market. 'I can't promise the measures we are taking will get a Darty-style performance overnight. But I am confident the increased focus on range and service and decreasing reliance on promotions will give it the edge over its rivals.'

Darty has been affected by the downturn in the French market, but it managed to push sales 0.5 per cent higher to pounds 441.6m. Sir Geoff said the group expected to add between six and eight Darty stores a year and saw the potential for up to 200 stores, compared with the 137 it has.

B&Q increased profits to pounds 44.5m, compared with pounds 41.6m. Kingfisher said the Warehouse stores - up to three times the size of its existing outlets - were performing well.

Superdrug improved profits by pounds 1.2m to pounds 14m despite a 2 per cent decline in sales as food and household products were dropped.

Earnings per share fell 3.4 per cent to 10p, but the interim dividend was maintained at 4.4p.

View from City Road, page 25

(Photograph omitted)

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Austen Lloyd: Law Costs HOD - Southampton

£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

SThree: Recruitment Resourcer

£20000 - £21000 per annum + uncapped commission: SThree: As a graduate you are...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn