Woolworths ramps up retail discounting war

LONDON — Woolworths PLC began a massive sale on Friday — raising the stakes for its peers by slashing prices by up to 50 percent — after talks between the troubled retailer's financial administrator and a potential buyer failed.

Deloitte, which was appointed to run Woolworths last week after the retailer announced it was insolvent, denied that the huge discounts were essentially a firesale to clear the shelves before the company is liquidated. It said talks were ongoing with other suitors.

"Additional goods have been moved to all stores and further stock will be added in the coming days," said Neville Kahn, Deloitte's reorganizationn services partner. "There is continuing interest in the core Woolworths business and the sale will continue whilst potential buyers finalize their plans for the purchase of the business."

The sale comes a day after British entrepreneur Theo Paphitis walked away from talks with Deloitte, saying that it was likely a break-up of the business would raise more cash for creditors of the retail stalwart.

Paphitis had hoped to retain the Woolworths brand name — the retailer is just a year shy of celebrating its centenary after opening its first store in Liverpool, northern England, in 1909 — by purchasing a large share of the existing retail business.

"Unfortunately, the constituent parts of Woolworths are more valuable than the whole," he said in a statement. "The prime location and size of many of the Woolworths stores makes them an attractive proposition for many larger format retailers such as supermarket chains, so they are very precious sites."

The Woolworths discounting campaign, for which the retailer has hired additional staff, ramps up competition among British retailers in the key Christmas season.

Desperate to attract shoppers who are tightening their belts as Britain heads into recession, several retailers have launched short-term sales and "buy one, get one free" promotions.

Marks & Spencer PLC repeated a 20 percent off sale day on Thursday — just two weeks after it similarly slashed prices for the first time in four years. Fellow department store chain Debenhams ran its 20 percent off sale for three days last week.

Woolworths is offering up to 50 percent off toys, 30 percent off Christmas trees and decorations and other reductions on DVDs and CDs.

Deloitte has said it plans to keep Woolworths' 800-plus stores around the country open over the festive season, but doubts remain over the future of thousands of jobs. The Woolworths group employs around 30,000 staff, with about 25,000 working in retail.

Deloitte also said Friday it is working to safeguard supplies at Entertainment UK Ltd. (EUK), Woolworths' wholesale distributor of entertainment products, which went into administration alongside the retail arm of the group.

Music retailer Zavvi told online customers earlier this week that the situation at EUK made it difficult to secure the availability of products.

Deloitte said "constructive talks" were taking place with both suppliers and customers of EUK to ensure arrangements to resume business.

The administrator was appointed last week after Hilco, the restructuring specialist, failed in its bid to buy the company's stores for 1 pound ($1.50) and assume a major share of its 385 million pounds of debt.

Two parts of the Woolworths group — its 2Entertain DVD publishing joint venture with BBC Worldwide and its Bertram book wholesale business — are not in administration. The company said it was in ongoing discussions to sell its 40 percent stake in 2Entertain to BBC Worldwide.

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