Woolies considers bid for clothing retailer

The high street retailer Woolworths is considering launching a bid for the discount clothing group Peacock as part of a review of its clothing suppliers.

Gerald Corbett, Woolworths' chairman, is understood to have held talks with Richard Kirk, Peacock's chief executive, about the possibility of extending the companies' existing relationship. "There have been discussions about how that relationship will evolve in the future," said one City source, adding: "It [a bid] is something that's been considered."

Woolworths is valued at £644m and is five times the size of Peacock, which is worth £122m. Peacock currently has clothing lines in Woolworths' out-of-town Big W stores but is also carrying out trials in several of the chain's city-centre sites.

But Peacock, which is said to be mulling an offer for the privately-owned clothing retailer Bonmarche, is thought to be less receptive to the idea of a Woolworths takeover. "There were some discussions but they haven't gone very far. There was an exploratory meeting, which didn't come to anything," said another source.

Woolworths is in the process of reviewing its current clothing suppliers as part of a broader review designed to turn around the business. The company started the review after Christmas after announcing the appointment of Trevor Bish-Jones, former managing director of the electrical goods chain Currys, as its new chief executive.

The possible bid for Peacock comes just days after it emerged that early-stage merger talks between Woolworths, which was demerged from Kingfisher last year, and the high street retailer Bhs had collapsed. Still, Philip Green, Bhs's entrepreneurial owner, refused to rule out the chances of a hostile bid. Woolworths responded by saying its priority was to stick with its recovery plan.

Last month, Woolworths admitted sales were still sluggish when it published trading figures at its annual general meeting. On a like-for-like basis, its sales were flat in the 15 weeks to 18 May.