Woolworths have cut losses

Woolworths, the high street retailer, saw sales rise by 16% in the first 6 months of 2007. The troubled toys, clothing and sweets chain announced a narrowing of its losses in the first 6 months, but said it was cautious about its prospects for the remainder of 2007.

Chief executive, Trevor Bish-Jones, warned that Christmas spending will be knocked by the current credit squeeze, he added that consumer confidence will be lower this Christmas. Mr Bish-Jones believes that the Woolworths Worth It! value ranges for home decorating and toys will excel over the festive season.

In addition, the chief executive said that investments that Woolworths made in 2006 are starting to pay off. Woolworths Entertainment UK distribution arm made some acquisitions that increased turnover. It supplies entertainment products to Tesco has just gained an Asda contract.

Mr Bish-Jones also commented that the group plans to keep stock tight going into the second half. However, there is scope for the entertainment sector to provide a “positive stimulus” across the group. He added that even if there is a slowdown in consumer spending, people will still spend money on children at these times. According to the chief executive, DVDs, books and games are positive this year. The strength of the DVD release schedule is outstanding compared to last year.

Furthermore, the group expects the Nintendo Wii, Microsoft Xbox and Sony PlayStation games consoles and related products to be huge sellers at Christmas. Sales will be boosted by DVD releases such as Shrek, Harry Potter, Pirates of the Caribbean and Transformers.

An analyst at Panmure Gordon welcomed the strong performance. They believe Woolworths will break even this year, which would be a major accomplishment. They are maintaining their current forecasts, but have reduced the target price from 29p to 25p.

The interim dividend is held at 0.43p a share, the group said its intention is to restore dividend cover as performance picked up.

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