Woolworths shares slump after profit warning

High Street retailer, Woolworths, issued a profit warning today sending its shares plummeting 15% to a 7-year low.

Woolworths stock has plunged more than 80% in value since the start of 2007, primarily due to increased competition from supermarkets and the internet.

The retailer said revenue in the half year to July 26 fell 3.1%, it blamed a downturn in trading conditions and has abandoned plans to sell its £200 million stake in DVD publisher, 2 entertain.

It is believed that the retailer had been in talks with its advisers at UBS to determine whether a sale of the growing DVD business made sense.

It was widely expected by the market that a sale of 2 entertain was imminent as it was seen as a means of reducing Woolworths’ high debt levels and placing £50 million into the company’s pension deficit.

2 entertain is a joint venture with the BBC to publish the broadcaster’s back catalogue, including Planet Earth, Little Britain and Doctor Who. A successful year was experienced in 2007 with sales soaring 23% to £250 million.

Following the plans to scrap the sale, the company said it had carried out a detailed review of its options but the board has decided that it is not the right time to proceed with a sale. The company believes that 2 entertain will grow in value over time and will retain its 40% stake in the business.

Commenting on the fall in profits, Richard North, Woolworths chairman, said EUK and 2e businesses continue to perform well. However, the retail business has experienced a deterioration of conditions over the last couple of months and fierce competition from supermarkets and the internet has had an impact on sales.

Mr North added that the group remains cautious about the outlook for retail.

Woolworths sells items such as toys, sweets, garden furniture and children’s clothes and runs more than 800 stores. The chain is the UK’s leading supplier of Pick’n’Mix sweets.

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