Work starts on Woolworths' rescue
Added (2008-Nov-29)
Woolworths' administrators have begun efforts to rescue the chain, after the firm said its retail stores could no longer operate as a going concern.
All 815 stores will stay open for now, but 30,000 jobs are at risk after the chain buckled under its £385m debt.
Administrators Deloitte said there had been "expressions of interest" for the stores and for the Entertainment UK wholesale business.
The MFI furniture chain has also gone into administration.
'Interest'
Deloitte said the search was on for a suitable buyer for Woolworths' stores and the Entertainment UK business, which supplies DVDs to supermarket groups.
"In the last 24 hours, we have received expressions of interest from a number of parties for both the retail and wholesale businesses," said Dan Butters, who works for the administrator.
The company had tried to sell itself for a nominal price of £1 to Hilco, a restructuring firm, which would have taken on the firm's debt, but this deal fell through.
Deloitte said the company would stay open past Christmas and Woolworths' employees in stores would be paid.
Woolworths' stores and four distribution centres employ 25,000 staff, while Entertainment UK employs about 5,000 people.
'Eye of storm'
Woolworths is not the only retailer suffering in the current climate. Analysts think more companies could face collapse.
"The eye of the storm has moved on from the banks to the retailers," said Keith Bowman, an analyst at Hargreaves Lansdown Stockbrokers.
- Furniture chain MFI has also gone into administration. It blamed falling demand for big ticket items, cash-flow problems and the withdrawal of credit
- The owner of Currys and PC World, DSG International, has reported a half-year loss of £29.8m, blaming a "tough and volatile" trading environment
- Retail group Kingfisher said sales at its B&Q home improvement chain were down nearly 9% amid the slump in consumer spending and the housing market
There are also fears that Woolworths' demise could spark a price war if the administrators slash prices to shift the company's stock.
Struggle
Woolworths had cash flow problems and struggled under the weight of its £385m of debt.
Its problems were compounded in the past couple of months when it was forced to pay cash when buying goods from suppliers, because trade credit insurers were no longer prepared to insure suppliers to Woolworths.
Robert Peston said that Woolworths had been one of the UK's weakest retailers for years.
But the sudden deterioration in the real economy and financial markets had triggered its demise.
"It's the suddenness of how everything turned bad that shocks and this means Woolies will not be the last casualty," he said.
