Friday, 10 October 2008
The Wonder of Woolies.
The wonder is what Sir Alan is doing investing in retail giant Woolworth's?
If we asked him does he think the market has bottomed out and its about to climb? Does he think that cheaper goods will be the order of the day now borrowing is over?Does he believe that this the end of the recession already? We would get the inevitable response "If you believe that, You're Fired!"
Woolworth's have been lurching along in the UK for a good few years now. A pretty poor set of results last Christmas on top of a slump of 3-4% in sales for 2007, a pre-tax loss of £99.7m for the six months to August '08, shares falling more than 80pc over the past 12 months and scrapping the interim dividend hardly inspire confidence. To alleviate their troubles the strategy for 2009 involves selling up to 120 stores, cutting a large number of products and job cuts and cost controls.
The problem with this strategy is job cuts and cost controls have been ongoing for at least two years now. There is only so much fat to trim, and no-one starts cutting costs with the leanest cuts. And disposing of stores in a property slump? Cutting product range has been proposed by analysts for years too, and this remedy is looking a bit like too little too late.
However Woolworth's have many excellent prime location, large unit size properties in great cities and towns and shopping centres where units of the size of a Woolworths rarely become available.
Maybe Sir Alan Sugar, who has a lot invested in commercial property, IS calling the market early but right, what with 10% of Woolworths led by the Icelandic retail Baugur group, and wants to be available if some very choice retail properties and the commercial distribution properties suddenly become available.
For those with some cash to spare there may well be a lot of Woolworths priced bargains to be had.
Posted by Bill Quango MP