The weird world of Woolies
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
It is a weird world they inhabit at Woolies. At the same time as reporting weak Christmas sales today, Trevor Bish-Jones, chief executive, announced he is spending £29m on a wholesale book distributor that last year made £600,000 before tax. This business, Bertram, is heavily dependent on independent booksellers and libraries, which don’t sound like growth markets. You might think Woolworths would know that – it said today it would take a £2m-£4m hit as a result of the collapse of Music Zone, the independent music retailer to which it distributed CDs and DVDs. Woolworths’ like-for-like Christmas sales fell 4.6 per cent, which is better than the 6.5 per cent decline it saw in the 18 weeks to December 2 but still dismal. Hopes that Baugur will put everyone out of their misery continue to support the share price.
The rest of today’s retail trading updates – the last big batch for this Christmas – includes some very poor numbers from DSG International, owner of Currys and PC World. This is partly because of a weak performance in Italy but business was dreadful also at Currys, or is it Currys.digital, or Dixons? Watch our reporter Tom Braithwaite explain the numbers on FT.com. The shares are down more than 9 per cent, which is quite something for a stock this big.
Poor Christmas sales also at Home Retail Group, owner of Argos and Homebase, but echoes of Next in the way it is making up for this by boosting profits with tight cost control.
Latest defensive move from the LSE: it says today it promises to cut fees for equity trading. The new pricing structure seems designed to encourage back to the exchange trades that are currently being done away from the exchange. These “internalised” now account for about half of all volume.
Countrywide is reconvening the EGM to vote on 3i’s bid, which was postponed this week. It will now take place on January 26.
Provident Financial, the doorstep lender, is selling its car insurance business. The business made £40m in 2005 but has since seen its premiums come under severe pressure. Some think the business, Provident Insurance, might fetch £225m.
We are also planning more on BP today and the impact of the Baker report. The bloggers have got going a bit. Under a headline “The BP Baker Report – another example of headlines not matching content”, Crisisblogger writes: “There was big news in the Baker report regarding BP’s safety record. Two items in fact. One of them is that BP has already substantially addressed all the recommendations put forward in the report. Second, and more important, the report provides a direct refutation of the very well publicized accusation of the head of the Chemical Safety Board that the safety problems at BP were a direct result of cost cutting. That theory goes well with the media and the public perception, but the Baker report said it wasn’t true. However, you will note, these were not the headlines.”
“Aside from the embarrassment for BP management, the assessment will throw gas on the fire of a number of civil suits filed against the company,” writes Douglas A. McIntyre at 247wallst.com. “There is also a criminal investigation into a fire at a BP refinery in Texas that killed 15 people.”
Feedthebull.com writes: “This could have a significant impact on earnings if they are forced to pay more money out in lawsuits. BP has already paid out around $2 billion in compensation payouts, repairs and lost profits and have set aside another $1.6 billion to resolve legal disputes. BP has said it will invest about $1 billion over five years to improve and maintain the Texas City site. All of these costs could have an impact on earnings, especially with oil prices falling 17% already in 2007.”
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