Spat Over Woolworths

One year on from the demise and collapse of Woolworths the former Chairman, Richard North and former chief executive Steve Johnson, publicly criticised Deloitte's handling of the collapse.

They noted that Deloitte's acted as both adviser and administrator to Woolworths, and cited that this was a potential conflict of interest.

North and Jones feel that Deloitte's didn't back an emergency rescue plan by Woolworths' management team, because of its interest in the higher fees it would earn as administrator.

Deloitte's have been quick to fire back, they are quoted on City AM:

"Woolworths failed because it was losing money and had no cash.

It was the directors themselves, not the banks, who appointed Deloitte as administrators, based on the realisation that the company had run out of money and could not continue trading on a solvent basis.

We are never driven by the fees available but simply by the pure economics of the options for the creditors."

They have a point, re who appointed them.

I would ask why the directors, if they were concerned about a conflict of interest, appointed them in the first place and are only raising this issue now?

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Woolworths Mark II?

The ex CEO of Woolworths, Sir Geoff Mulcahy, is working with a yet to be named group which plans to create a chain of 200 "Woolworths-style" stores.

The group wants to buy some of Woolworths' vacant stores, and hopes to raise between £5M-£10M from private investors.

Those of you who want to suggest a name for the group may do so via Twitter.

There may well be an opportunity here, if Woolworths II learns the lesson from the failure of the original Woolworths; namely, selling crap in poorly laid out stores that can be bought elsewhere for less is not a recipe for success.

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Back From The Dead

It would seem that the much lamented corpse of Woolworths may be about to rise from the grave, albeit in a reduced form.

Shop Direct has bought the name, and intends to relaunch it online this summer.

Needless to say, as Shop Direct already owns other brands (eg Littlewoods and Kays) and that Woolies will only be an online presence there will be little opportunity for many of the old staff to be rehired.

Indeed, Shop Direct announced jobs cuts last week.

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Woolworths In Administration

As expected, Woolworths is now in administration. Deloittes, who are acting as administrators will keep the stores open and pay staff in the period up to Christmas; there are expressions of interest in the company.

However, this sorry state of affairs could have been avoided if certain lenders had not blocked the company's plans for selling the retail unit to Hilco.

The lenders who blocked the plans included Barclays, and Bank of Ireland subsidiary Burdale Financial.

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Woolies Suspended

The Times reports that shares in Woolworths have been suspended at 1.22p this morning, as the company attempts to conclude talks to sell its 840 store retail business.

Hilco are understood to be prepared to buy the retail division for £1. However, the banks that Woolies owes money to are less than happy with the possible losses arising on such a deal.

Added to the problems that Woolies faces, in trying to secure a deal, is funding the wage bill and continuing to trade "solvently". The directors are under a legal obligation to trade solvently, in the event that Woolies becomes "insolvent" (ie the banks refuse to provide any more working capital) then the company will be forced into administration thus threatening 30,000 jobs.

In the "good old days" of "privately" owned banks (ie before the banks went cap in hand to the government for a bailout) the banks would have only themselves and their "consciences" to answer to wrt pushing a company in administration.

However, now that they are semi nationalised, for them to force 30,000 people onto the dole queue in this manner would be a tad "politically unwise" to say the least.

That being said the banks are very capable of making a very foolish decision and consigning Woolies to the dustbin of history, were they to do so they would be signing their own death warrants.

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The Ultimate Pound Store

Woolworth's has the dubious distinction of turning itself into the ultimate pound store, as it puts its 815 retail stores up for sale for £1.

Woolworths has about £295 million worth of debts, and has entered takeover talks which could see its retail division sold to Hilco.

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