PracticeAccounting FirmsOverview: Woolworth’s new FD

Overview: Woolworth's new FD

Prospects: Woolworths' new FD face an anxious Christmas

At many times in its almost 100-year history, being appointed Woolworths FD
would have been seen as a great crowning achievement of an accountants’ career.

It may still seem so to Robert McDonald, its new FD, but at the same time,
the company looks more perilously placed now than ever before.

Its centenary falls next year, and City analysts expect the forthcoming
Christmas period to determine whether it gets there.

What’s happened?

Woolworths has been hit hard by competition from online retailers and
supermarkets.

City analysts feel McDonald has taken on a big job. One expressed surprise
that he had accepted the role, arguing his track record was strong and credible.
McDonald was previously group FD of Punch Taverns and has also worked for Allied
Domecq.

Some analysts say rumours of Woolworths having difficulties with supplier
agreements have been circulating for a while.

The group disclosed in its interim results a pre-tax loss of £99.7m for the
six months to 2 August. And the company’s accountants did not give it much of a
boost either.

Auditors PricewaterhouseCoopers noted at the time of the interims, ‘the
existence of material uncertainties which may cast significant doubt about the
company’s ability to continue as a going concern’.

Woolworths is working through a strategy and budget plan, and is in
discussions with lenders Burdale Financial, part of Bank of Ireland, and GMAC
Commercial Finance, who have hired Deloitte to help them through the process.

The two lent the Woolworths group £385m as part of a restructuring plan in
January this year.

What’s going to happen?

Ultimately, with Christmas trading now having commenced, McDonald has in many
ways been left with his hands tied.

He is unable to reverse decisions made on the design and execution of
in-store advertising, as well as the distribution and make-up of store ranges,
City analysts say.

The Christmas period is critical to Woolworths’ future, but McDonald’s energy
and attention is more likely to be afforded to working through debt structures,
much of which is secured against several assets and UK stock.

Creditors are likely to be looking at the size of existing loan arrangements
following such large losses.
McDonald’s tenure at Woolworths commenced on Monday this week. He replaced
Stephen East, who was appointed to the board in 2005.

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