Woolworths demise 15 years on: What happened at the retail giant and could it come back?
Parachuted in to turn around a failing giant of the British high street, Robert McDonald was part of Woolworths’s last roll of the dice.
The new finance director said he was excited to join an “iconic” brand when he began work in early November 2008, but just three weeks later the company would sink into administration.
And there was little the company’s last ever executive hire could do to stop the famous store – known for its pick ‘n’ mix, homeware and everything in between – from closing for good on 6 January 2009.
“Like everyone my age, I had grown up thinking its existence was a normal part of life,” Mr McDonald told Sky News.
“I was very pleased to have the opportunity to work there. I knew it was going through hard times and looked forward to being able to help.
“But, sadly, it was past that by the time I joined, and the end seemed very swift.”
Analysts blame its downfall on a toxic combination of low cash reserves, lost credit insurance and crippling debt – all exacerbated by the 2008 financial crisis.
It marked the end of Woolies’s near century-long presence on the high street, with more than 800 stores closed down and about 27,000 jobs lost.
Woolworths was popular for its pic ‘n’ mix
For many of its staff, news of Woolworths’s demise into administration came from the media, with earlier rumours confirmed in reports on 26 November 2008.
Paul Seaton, who had worked as a store manager and as part of the IT team during 25 years at the company, said his colleagues “crowded around the TV” to hear their worst fears confirmed.
“It just all fell to pieces after that,” Mr Seaton, now 61, told Sky News.
“The sad reality is Woolworths took 99 years to build, and it took 42 days from administration to the day the last door shut. 99 years of meticulous care and thought… gone.”
The board insisted administration wouldn’t detract from “business as usual”, Mr Seaton said, but that all changed when he was called to a meeting on 5 December.
He was among 500 senior figures gathered at Woolworths HQ, where each was given a letter written by administrators Deloitte notifying none would be paid another day and all had lost their jobs with immediate effect.
The notice given by Deloitte to Paul Seaton
“We were summoned and told not to come back, all 500 of us,” Mr Seaton said, adding their passes into the building were deactivated on the spot. “The business only carried on for one month after that.”
While his time at the company came to an abrupt end, he dedicated time to creating a virtual Woolworths museum, preserving memorabilia and documenting the chain’s long history.
A store for the family
The first store opened in November 1909 in Liverpool, by New Yorker Frank Woolworth, who had already established the brand in the US.
In a prescient diary entry, he wrote during an earlier trip to Europe that “a good penny and sixpence store, run by a live Yankee, would be a sensation here”.
Such was the success of the UK counterpart, his successor Byron Miller reportedly beamed that “the child has long since outgrown the parent”.
Mr Seaton thinks the literal child-parent relationship was key to the store’s popularity.
“There used to be old adage that people need Tesco because everyone has to eat, and people trust Boots because you call the manager ‘doctor’, but they went to Woolworths because they love Woolworths,” he said.
“Have you ever heard a kid saying ‘mum I want to go to Tesco’? The whole reason I loved being a manager is kids and families loved coming to Woolworths.”
Paul Seaton with Woolworths memorabilia collected over the years
The store’s name lives on in Australia – though has no connection with US or UK equivalents – where it is the country’s largest supermarket chain and last year recorded a net profit of $1.62bn (about £87bn).
US stores closed in 1997, but the UK branches recorded a record profit topping £100m just one year later.
What went wrong?
Customers were still shopping at the UK stores, and in the firm’s final annual report the company made a slight pre-tax profit in 2007.
But even with some signs of recovery ahead of 2008, Woolworths had a terminal problem: modest cash flow and a £385m mountain of debt.
Retail expert Clare Bailey was among the consultants drafted in 2006 to tackle the mammoth task of detangling the company’s supply chain, which she says was collecting too much of some stock and too little of others.
As banks began to lose faith in Woolworths’s finances, the firm had its credit insurance withdrawn – meaning it had to pay suppliers immediately, rather than in instalments.
To make matters worse, many Woolworths stores were sold a few years before and rented back at a price that only appeared to increase over the years.
Left with fewer assets, little in way of cash reserves and no credit insurance, the retailer was not prepared for the coming shock of the 2008 financial crisis.
“Cashflow is like oxygen,” Ms Bailey told Sky News. “You can be profitable, but if you haven’t got cash to pay bills or for when something goes wrong, then that’s it – game over.”
The company reported a pre-tax loss of £90.8m over the first half of 2008 in September that year, despite launching the WorthIt range – promoting low-cost products – in 2007.
Losing sales and customers
One of the big issues Ms Bailey identified in the supply chain was a failure to keep evergreen products on shelves.
For example, she said only 20 stores out of more than 800 nationwide had the correct amount of coat hangers, a product that sells all year, while others bought far too many Christmas trees.
It meant money was “trapped in stocks”, she said, and would gradually turn customers away.
“And if you replicate that through other products, customers could find what they didn’t want, but not what they wanted,” she said.
“You might, as a customer, give them the benefit of the doubt a few times, but eventually they will turn to other places. So, they not only lost the sale – they also lost the customers.”
It’s this perceived neglect of the customer journey that small business growth expert Claire Hancott believes cost Woolworths at the turn of the century.
Footfall almost halved from 7.5 million in 2000 to around 4.5 million in 2007, she said, while the market for Woolworths’s once-popular CDs was shrinking as more consumers headed to the internet.
“Businesses can’t ignore these big trends, even if they won’t come into play for years,” Ms Hancott told Sky News.
“Blockbusters was a classic example, when they thought digital films wouldn’t take off.
“Woolworths wasn’t at the forefront of consumer technology and it’s so important to be looking 10, 20 years into the future – it takes a long time to prepare.”
Discount stores such as pound shops began to pop up on the high street, adding to growing competition that ultimately forced an attempt to sell the company in November 2008 for – ironically – just £1.
It was hoped a sale to restructuring experts Hilco would give them the job of repaying the debt, but the banks rejected the move.
The company went into administration just days later.
A false dawn, but will the sun rise on Woolworths again?
Ever since the company collapsed under the weight of its debt, rumours of a potential return to the high street have never been completely quashed.
A fake announcement – made by a social media account falsely claiming to be run by Woolworths – heralding a comeback was met with excitement in 2020, with savings platform Raisin UK reporting 44% of people discussing the store’s revival online “loved the news”.
The post turned out to be false
In August 2022, pollsters at YouGov found 49% of survey respondents said they wished they could bring back Woolies – a far higher proportion than any other defunct chain.
But for all the hopes of an encore, some of those involved with the firm rue the time that has since been lost – and believe it may have even survived.
“I came in at the end of 2006, but the work we were doing can take three or five years,” Ms Bailey said. “Maybe they started too late.”
All but a small handful of the Woolworths stores were re-let to other retailers within a decade, she added, meaning the spaces “still had merit in the local community”.
“The inner workings of a business are quite complicated,” she said.
“But I think it’s a sad situation it collapsed, because – had they been given a stay of execution – they may well have been successful in turning it around.”
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Ms Hancott agrees: “In another time, would it have crumbled? That’s the million-pound question that nobody will be able to answer.
“Had it not been in the midst of a crisis, then it may have survived.”
For Mr McDonald, a chance to draw on his experience handling company finances never materialised.
It was, nonetheless, a “fascinating experience”, he said.
“It’s such a shame we didn’t have longer to turn that business around,” he said.
“I joined as part of a turnaround plan, but it was too late to change the course of history.”
Business
Vivergo: How US-UK trade deal could bring about collapse of huge renewable energy plant in Hull
The smell of yeast still hangs in the air at the Vivergo plant in Hull but the machines have fallen quiet.
More than 100 lorries usually pass through here each day, carrying 3,000 tonnes of wheat. It is milled, fermented and distilled. The final product is bioethanol, a renewable fuel that is then blended into E10 petrol.
This is a vast operation. It took several years to build, with considerable investment, but it is on the verge of closing down. Management and staff are holding out for a last-minute reprieve from the government but time is running out.
It’s been a turbulent journey. The plant was already being annihilated by US rivals, losing about £3m a month. Vivergo and Ensus, based in Teesside, blamed regulations that enable US companies to earn double subsidies.
They were pushing for regulatory change but then a killer blow: The US-UK trade deal, which allows 1.4 billion litres of American ethanol into the UK tariff-free (down from 19%).
“We’ve effectively given the whole of the UK market to the US producers,” said Ben Hackett, managing director at Vivergo.
“If we were to have the same support that the US industry has, if we could use genetically modified crops, we wouldn’t need that tariff. We would be able to compete. If we had the same energy costs. We wouldn’t need those tariffs.”
The government has the weekend to come up with a plan that could keep the business running. If it fails, Vivergo will begin issuing redundancy notices to its 160 staff.
Ben Hackett
It’s a devastating prospect for workers, many of them live in Hull and are nervous about alternative opportunities in the area.
Mike Walsh, a logistics manager who has been working at the plant for 14 years, said: “It’s not a great place to be at the moment. It’s a very well paid, very high-skilled role and they’ve (Vivergo) given everybody an opportunity in an area that doesn’t pay that well…. The jobs market isn’t as good as what people would like. So it does impact the local economy.”
He called on the government to “help us, save us, give this industry a future”.
His colleague Claire Wood, lead productions engineer, said: “I moved here after a career in oil and gas for 10 years, partly because I want to be part of the transition to renewable fuels. I can see so much potential here and it’s absolutely devastating to know that this place might be closed very, very shortly and that all that potential just goes away.”
Thousands more could be affected. Haulage companies may have to lay off truck drivers and farmers could also suffer a blow.
Vivergo makes bioethanol using wheat. That wheat is bought from farms from Yorkshire and Lincolnshire.
Claire Wood
The National Farmers Union has sounded the alarm, saying: “Biofuels are extremely important for the crops sector, and their domestic demand of up to two million tonnes can be very important to balance supply and demand and to produce up to one million tonnes of animal feed as a by-product.”
Another bioproduct is carbon dioxide. The gas can be captured and used to put the fizz in drinks or injected into packaging to preserve food.
If Vivergo and Ensus were to go, Britain would lose as much as 80% of its output of carbon dioxide. Supplies are already tight across Europe, meaning this decision could compound shortages across a range of sectors, from meat-packing to healthcare.
The industry is calling on the government to help. Vivergo says it needs temporary financial support but that the government must create a regulatory and commercial environment in which it can thrive.
It says rules that award double subsidies to companies that use waste product in their bioethanol must be changed. At present, these rules are being used by US companies that make ethanol from Uldr – a by-product of processing corn. They argue this is not a genuine waste product.
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Another option is to grow the market. Industry leaders are calling on ministers to increase the mandated renewable fuel content in petrol from 10% to 15% and for an expansion into aviation fuels. That would allow British companies to carve out a space.
The government has been locked in talks with the company since June.
It said: “We will continue to take proactive steps to address the long-standing challenges it faces and remain committed to a way forward that protects supply chains, jobs and livelihoods.”
However, the time for talking is almost over.
Mr Hackett said he had no idea how the government would respond but he was firm with his stance, saying: “In times of global uncertainty, losing that energy certainty and supply from the UK is a problem.
“I think what they’re missing out on is the future growth agenda. We’re the foundation on which the green industrial strategy can be built. We make bioethanol that today decarbonises transport. Tomorrow it will decarbonise marine. It will decarbonise aviation.”
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