27,000 Woolworths staff face axe

The high street downturn today claimed its biggest casualty with Woolworths’ 27,000 shopworkers told they face redundancy in the new year.

Talks with potential white knights continue but administrators Deloitte have told staff they should be prepare themselves for the worst.

‘Some people have been with the company for 10, 20 years and it really means something to them as individuals,’ said one head office worker. Woolworths has been around for 99 years so it is almost a heritage brand.’

Workers learned of the closure plans in an email from head office this morning.

A first tranche of 200 stores will close on 27 December followed by further outlets on 30 December and 2 January. The final stores will open their doors to the public for the last time on 5 January, bringing down the curtain on nearly a century’s trading.

Rescue talks continue with a number of parties interested in buying parts of the loss-making business. Interest is said to come from groups in the UK, Asia, Africa and the Americas but hopes of a deal being stuck look increasingly forlorn.

Administrator Neville Kahn, a partner at Deloitte, conceded it looked as if the brand would now disappear from the high street: ‘Quite a few people have looked at the business and decided not to proceed.’ He said buyers were finding it difficult to secure financial backing because of the credit crunch. In any case the potential buyers only wanted a fraction of the 807 stores on its hands, meaning there would still be thousands of job losses.

The government also appeared to be backing away from intervening: ‘We are disappointed that the administrators have been unable to find a buyer,’ said a Downing Street spokesman. ‘JobCentre Plus stands ready to work with members of staff and the company to manage the impact.’

A break-up looks inevitable with 300 stores already pledged to rival groups, including food, clothing and discount retailers. Names in the frame include Iceland and Wilkinsons. If buyers are not found for the rest of the estate they will be handed back to landlords in the new year.

Administrators said Woolworths staff, which includes 22,000 permanent and 5,000 temporary workers, would be entitled to statutory redundancy packages – meaning a week’s pay for each year of service. However, as last-ditch talks continue, the administrators were keen to stress staff were not yet on notice.

The Woolworths closing down sale has been a boon for shoppers, with last Thursday its biggest sales day ever. The store has used tactical promotions to win customers away from rivals who are also slashing prices. It expects to be the biggest seller of X Factor winner Alexandra Burke’s Christmas single – a version of Leonard Cohen’s Hallelujah – after undercutting the rest of the high street with a £3.19 price tag. Shelves continue be refilled with 50m items due to flow into stores this week.

‘Closing down Sale’ hoardings will soon replace Christmas banners in shop windows with discounts ratcheted up to more than 60% off. Some staff will work on after the official close date of January 5 with the task of sweeping up the stores and readying them for their new owner – or as looks increasingly likely, to lie empty, blighting high streets around the country.

Deloitte was appointed late last month as administrator to Woolworths’ retail business and distribution arm, EUK, which supplies CDs to Zavvi and supermarkets, after management failed to agree financing terms with its banking syndicate.

It has already made 1,150 staff redundant as operations were trimmed behind the scenes at its head office and the EUK warehouses.

Deloitte said it would take several months to add up the amount raised that would be shared out among Woolworths’ creditors. The group owes its banks close to £400m and has secured creditors they are first in line for repayment. Woolworths’ suppliers are not so lucky. The collapsed group owes money to 500 companies and they stand to receive only a fraction of what they are owed.

The writing is on the wall for Woolworths in its current state but its resurrection in some form has not been ruled out with a number of parties interested in buying the rights to the name. ‘I think Woolworths will come back onto the high street,’ said Kahn. ‘Whether it is in early 2009 is uncertain but I’m confident it will reappear.’

Wednesday 17 December 2008 18.54 GMT
Zoe Wood

Source: The Guardian

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