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Saturday, November 29, 2008

Trying to save Woolies

As thousands of workers await news of their fate the Guardian has details on what is going on with Woolworths and the reality of Labour Britain in the middle of a depression:

The collapse of Woolworths is causing havoc across the retail sector in the run-up to Christmas, with suppliers fearing they will not get paid and other retailers facing stock shortages amid uncertainty about the future of the group's distribution operations.

The news comes as administrators Deloitte prepare to spend the weekend sifting through more than 200 expressions of interest in the bust business. They are understood to range from offers for individual stores to about a dozen overtures for the entire business. Interest is understood to have come from some supermarkets, with Carphone Warehouse said to be looking at parts of the portfolio.

BBC Worldwide is looking at buying Woolworths out of its 2entertain DVD publishing

Deloitte has pledged to keep Woolworths stores open into the new year. But as well as being a retail outlet, Woolworths is a big distributor of CDs, DVDs and video games to supermarkets through its Entertainment UK subsidiary, and of books to independent outlets through Bertram Group, which it bought last year.

Both play a crucial role in supplying stores in the run-up to Christmas. Asda said last night it has started putting contingency plans into action to ensure that its supply chain does not collapse. A spokesman for Morrisons said its stores have also "made alternative supply arrangements".

But other suppliers are already suffering from Woolworths' collapse. Yesterday independent DVD company Metrodome announced it is owed £320,000 by Entertainment UK, one of its largest customers. Metrodome is understood to have done particularly well with DVD sales of last year's release In The Name of the King.

The retail sector is under enormous pressure at one of its busiest trading periods and many thousands of people will have their Christmas ruined by the consequent uncertainties. As if to underline the problems yesterday's South Wales Echo published details of the 2,699 permanent job losses and threatened losses in South Wales in the last month alone.

It is a grim situation and not one that is going to be addressed by economic summits. Many shops are already discounting goods making the cut in VAT superfluous. If people are going to be encouraged to go out and spend then they need some economic certainty and money in their pockets. That is why the Liberal Democrats have been calling for income tax cuts for lower paid workers, raising tax thresholds and for banks to start lending to business again so as to help them get through this crisis.
As part of this economic downturn we are suffering, I'd like to share with your readers an email I was sent this very morning.

Once upon a time in a village, a man appeared and announced to the

villagers that he would buy monkeys for $10 each.

The villagers, seeing that there were many monkeys around, went out to

the forest, and started catching them. The man bought hundreds at $10

and as supply started to diminish, the villagers stopped their efforts.

At this point the man announced that he would now buy at $20 each. This

renewed the efforts of the villagers and they started catching monkeys

again. Soon the supply diminished even further and people started going

back to their farms.

The offer increased to $25 each and the supply of monkeys became so

limited that it was an effort to even see a monkey, let alone catch it!

The man now announced that he would buy monkeys at $50 each! However,

since he had to go to the city on some business, his assistant would now

buy on his behalf for him.

In the absence of the man, the assistant told the villagers, 'Look at

all these monkeys in the big cage that the man has collected. I will

sell them to you at $35 each and when the man returns from the city, you

can sell them to him for $50 each.'

The villagers rounded up with all their savings and bought all the


They never saw the man nor his assistant again, only monkeys everywhere!

Now you have a better understanding of how the stock market works.
I have to ask you Mr. Black.

When did you last shop at Woolworth's?
Couple of weeks ago. I have a weakness for the pick and mix!
Isn't Entertainment UK the joint venture with BBC Enterprises? If so, it remains viable.

As to Woolies' market, that has been steadily eaten into by Wilkinson. As a private company, this is not prey to stock-market whims, and, being based outside London, makes real-world purchasing decisions.
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