Woolworths blames lack of blockbusters for sales slide

Woolworths blamed a weak DVD release schedule for a further collapse in underlying sales as it ruled out yesterday handing any of its surplus cash back to shareholders.

Woolworths blamed a weak DVD release schedule for a further collapse in underlying sales as it ruled out yesterday handing any of its surplus cash back to shareholders.

The retailer, which was involved in abortive merger talks with the private equity group Apax earlier this year, said like-for-like sales in the 18 weeks to 4 June fell by 4.4 per cent across its high street chain. The gross margin also softened.

Trevor Bish-Jones, the chief executive, said: "The top 10 DVDs are just not as good films as last year." He said the poor release schedule meant "our market share has gone backwards" because the group's sales are focused on new releases. Analysts estimated that underlying sales of DVDs and CDs, which account for one-third of the group's sales, fell by as much as 15 per cent.

Excluding entertainment sales, like-for-like sales were just 0.3 per cent down, which Mr Bish-Jones said "is just about the best performance of any retailer on the high street". Yesterday the British Retail Consortium said sales volumes fell 2.4 per cent in May.

Analysts took a knife to profit forecasts, slashing as much as 10 per cent off their full-year numbers. Woolworths' house broker, UBS, cut its pre-tax profit forecast by 8 per cent to £60m.

Since Apax pulled its proposed £837m offer - worth 58.2p per share - in April, shares in Woolworths have nearly halved, leaving the hedge funds that piled into the stock nursing huge losses. The shares closed at 35.75p yesterday, up 1.25p. Woolworths said it would not heed calls to hand cash back to shareholders. The group said it needed "to maintain the financial capability to fund the seasonal build-up in working capital ahead of the peak Christmas period".

Elliott Associates, the New York-based hedge fund spearheading a campaign to get the group to hand back cash, said it was sticking by its original demands.

Private shareholders expressed mixed views about the group's performance at yesterday's annual meeting. One criticised the stores as "dreary and unattractive", asking why Mr Bish-Jones deserved a bonus, while another questioned whether the group's strategy of positioning itself as a niche kids and celebrations retailer was "precarious".

"Last year was virtually disastrous for the retail division. How do you justify payment of a 16 per cent cash bonus for the executive team?" one asked.

In response to criticism that the retailer did not use enough "plain English" in its annual report, Gerald Corbett, the chairman, said Mr Bish-Jones was a "great retailer ... not great at the English language".

He said: "I couldn't help but laugh when I heard Trevor tell a US hedge fund, 'we can't sell the stores because we don't know any of the freeholds and if you don't mind my saying so sir, that's a complete red haddock'."