Analysts are predicting that the high street firm may soon go into administration.
Woolworth’s chief executive Steve Johnson will have a little less bad news to dish out when he announces the company’s interim results on Wednesday morning, as their House Broker, UBS, has done the deed for him.
The news, that profits at Woolworths, currently believed to be in ongoing bid discussions with Iceland Frozen Foods boss Malcolm Walker who has already made an initial offer for the company, comes ahead of yesterday’s report in the Independent that credit insurers, Euler Hermes and Atradius, have stopped insuring firms supplying Woolworths and cancelled some policies linked to the company altogether.
The paper went further by suggesting that one analyst believes Woolworths, one of the UK’s most well-known and once respected retailers, is close to being put into administration.
"It's looking increasingly bleak, said an analyst speaking to the Independent. "Woolworths is heading towards administration very quickly."
A spokeswoman for Woolworth's was quick to refute the unsubstatiated claims in the Independent saying: "The group continues to work closely with suppliers and credit insurers in what is clearly a difficult environment for the retail sector as a whole.".
House broker UBS expects a pre-tax loss to be reported when Stephen Johnson addresses shareholders for the first time since becoming Chief Executive two weeks ago along with a 3.2% deterioration in gross margin.
Investors fearing that the underlying earnings at Woolworths will be lower than that suggested by July’s profits warning saw nearly 10% sliced off the company’s value this afternoon. It is now capitalised at just £99m.
Whether the dismal UBS forecast deters Malcolm Walker and friends from their bid for Woolworths remains to be seen, but if passed experience is anything to go by Walker won’t be scarred off easily. By combining the best of Woolworth's 815 retail stores with the Iceland Frozen Food chain Walker has the opportunity to reverse the habitual interim losses inherent in the group’s failed retail model and stop the supermarkets from stealing their customers while they do their weekly food shop.
