Woolworths (UK)

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Woolworths was once one of the most familiar names on the British High Street, a leading retailer of toys, music and video entertainment. It achieved a certain level of stability after it was demerged from former parent Kingfisher, but the retail division never regained a clear and cohesive strategy, and performance was further dented by difficult market conditions on the high street. It proved especially hard to share off the core brand's old-fashioned and rather downmarket image. By late 2008, the business was struggling to avoid bankruptcy, and administrators were finally appointed at the end of November. With no buyer to be found, all 800-plus Woolworths outlets closed their doors in January 2009. However the Woolworths brand name and selected other assets were acquired by the Littlewoods mail order group, now Shop Direct, and were relaunched later that year. Shop Direct eventually shuttered the Woolworths site in 2015.

Woolworth opened its doors in the UK in 1909 in Liverpool, the first overseas operation of the legendary US retail business founded by Frank W Woolworth, who had opened his first five-and-dime store in New York in 1878. By the start of World War I in 1914, there were more than 30 branches of "Woolies" (as it was popularly known) in the UK. FW Woolworth of the UK went public in 1953 (although the US company retained control), and it embarked on a mammoth expansion spree that made it Britain's biggest retailer. By the mid 1960s the group ran more than 1,100 outlets nationwide, and it even controlled its own enormously successful record company division, which produced albums of cover versions of hit singles (in the days before record companies released compilation albums of their own). But Woolworths was slow to adapt to the fast-changing British retail market. In 1969, Marks & Spencer overtook Woolworths in store numbers, and as pressure mounted during the 1970s from Boots, WH Smith and others, Woolies slipped steadily downmarket.

In 1973, the group launched catalogue showroom Shoppers World to take on another rival Argos, with limited success, as well as several Woolco department stores. In 1980, the group jumped into DIY, taking over B&Q. Two years later, however, Woolworths of the US took the decision to withdraw from the UK, and sold its controlling stake in the British company to property group Paternoster, and a new management team was appointed. (Woolworths of the US underwent several transformations of its own over the following years, becoming sports retailer Venator, and then Foot Locker).

During the 1980s Woolworths UK provided the foundation for diversified retail group Kingfisher (see separate profile). In 2000, however, following the collapse of a deal to merge with supermarket group Asda, Kingfisher began steps to break itself up. Woolworths was the first unit to be spun off, demerged as a separate company in August 2001. The group's first year as an independent business was somewhat troubled. Trading difficulties and restructuring costs severely dented profits, leading to a large loss. In 2002, Woolworths entered talks to merge with rival high street retailer BHS, but these were later abandoned. In early 2005, private equity group Apax made a conditional offer to take Woolworths private, valuing the company at around £790, but subsequently withdrew from talks after examination of Woolworth's financial records. At around the same time, Woolworths sold off its secondary music and video retail chain MVC to private equity buyers, although this later filed for bankruptcy.

By now, Woolworths still had more than 800 stores across the country, selling a broad range of general merchandise. It claimed to be the UK's leading retailer of entertainment videos and confectionery (mainly pick n' mix sugar candy), and the #2 in music. It was also a major force in toys and children's clothing, with a long-established reputation for value. Inhouse brands included Chad Valley and Ladybird. The group was also a major player behind the scenes in home entertainment publishing and distribution. A separate subsidiary, Entertainment UK or EUK, was the country's leading wholesaler of music, DVDs, video and software, supplying third-party retailers such as Asda, Zavvi and Morrisons as well as Woolworths outlets. The group acquired leading book wholesaler Bertrams during 2007. Woolworths had also for many years managed a home entertainment publishing division, comprising home video publisher VCI, budget music label Demon and production company Banana Split Productions. In 2004, these businesses were merged into a new joint venture with BBC Video under the name 2entertain, which marketed an extensive range of television entertainment and made-for-video content on DIV and VHS. Woolworths Group retained a 40% stake.

The group's financial performance had remained under pressure ever since demerger from Kingfisher. For the year ending January 2008, sales rose almost 9% to just under £3.0bn, but pretax profits fell 27% to £11.7m. The Woolworths retail division generated sales of around £1.7bn, but all profits were contributed by the wholesale and publishing units.

That year, Icelandic retail group Baugur, whose UK retail interests already include Hamleys and Iceland, launched a bid to buy out the Woolworths retail chain from the distribution and entertainment businesses. The bid was rejected by the group's board, and was subsequently cancelled out by Baugur's own financial problems, which resulted from the effective collapse of the Icelandic economy in Autumn 2008. In November, as economic recession spread across the whole UK retail sector, Woolworths Group admitted that it was now in early negotiations to sell off its entire retail division for as little as £1. Those discussions could not be resolved, however, and the group was eventually forced to call in administrators in November 2008. No buyer was found, and the store closed all its 800 outlets in January 2009, with the loss of around 29,000 jobs.

Negotiations continued for the group's various subsidiaries. The suspension of operations by wholesaler EUK had a knock-on effect on other retailers, notably the Zavvi music and video retail chain. Unable to source supplies over the Christmas period, and obliged to pay its outstanding debts to Woolworths group administrators, it too filed for bankruptcy in January 2009. Although there were no buyers for the brick and mortar arm of the business, some assets were successfully sold. The Chad Valley toy unit was acquired by Argos group, while the Woolworths brand name and the Ladybird clothing business was sold to the Barclay brothers, owners of the Shop Direct mail order group, best known for its Littlewoods clothing catalogue. They resurrected the Woolworths brand in summer 2009 as an online-only retailer. The BBC agreed to buy out the group's 40% stake in 2entertain. This had been valued in 2008 at around £100m. However, as a result of Woolworths' collapse, a deal was finally agreed in March 2010, with BBC Worldwide paying just £17m to buy the outstanding shares.

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