11/27/2008 1:32:00 PM
Administrators keep Woolworths trading through Christmas
The collapse of Woolworths last night has prompted fears of a drop in handset prices as administrator Deloitte tries to salvage its assets.
Those fears have arisen despite reports that potential buyers for some of the retailer’s stores have today made contact with Deloitte.
The administrator to the retail business has drafted in restructuring company Hilco, to keep Woolworths trading through Christmas, though the retailer’s position in 2009 is shrouded in doubt.
Woolworths is a major mobile phone retailer (they are among its most high-ticket products) in the run-up to Christmas, with an estimated 400,000 handsets sold in the last six to eight weeks of the year.
Sources close to the issue claimed that as much as 40% of its mobile phone sales are made in the final six weeks of the year. The retailer’s more general products have an even bigger squeeze during the run-up to Christmas, with as much as 90% of its profits made in the last six weeks.
There are concerns that the administrator will start making severe price cuts to clear stock (even below cost price if necessary – effectively liquidating the business) to raise cash to pay its staff and creditors.
Cuts below cost price will affect all retailers selling prepay phones this Christmas. Some of Woolworths rivals are known to be looking at picking up prepay stock from Woolworths simply to avoid the cut-price phones invading the market.
The Woolworths management team has struggled to find a buyer for the business, as it was struggling a long time before the current downturn in the economy took hold. It has led many to believe that Deloitte is unlikely to find a buyer for the business, even after Christmas.
One source close to the company said: ‘There is an obligation on the administrators to get the best value on the assets, and it will be interesting to see how desperate they are to shift their stock.’
Argos and Carphone Warehouse are likely to be the major high street beneficiaries in terms of prepay sales with Woolworths’ collapse.
Deloitte was drafted in last night, despite an attempt by the government’s business minister Peter Mandelson on Tuesday to save the retailer, or at least to ensure that staff wages were paid.
Staff at Woolworths head office in Marylebone are understood to be in the dark regarding the future of the business, with a briefing from management and the administrators expected later this evening (Thursday).
There are 31,000 employees at risk from the collapse of the 800-store business that was founded in 1909.