Woolworths CEO to step down

A Woolworths store is seen in a handout photo.

LONDON (Reuters) - Sweets-to-DVDs retailer Woolworths Group WLW.L said it had asked Chief Executive Trevor Bish-Jones to step down as it unveiled a deterioration in sales and margins for the year to date, dragging down its shares.

Woolworths, one of the most recognised high street names, with more than 800 stores, said this was the right time to seek new leadership for the business.

"The timing was down to the board but this is the sensible moment to make the change. It's entirely amicable and Trevor has a contract which we will honour in full," Chairman Richard North told reporters on a conference call on Wednesday.

Bish-Jones, who has struggled to revive the retailer in six-and-a-half years with the group, will continue in his role for the next three months to enable a search for his successor, which is under way, to be completed.

"Nothing more has happened other than appointing the head hunters and giving them the initial brief but both internal and external candidates will be considered," said North.

Woolworths, battling cut-price competition from supermarkets and online retailers, said like-for-like sales at its high street stores fell 2.2 percent in the first 19 weeks of its financial year, in line with expectations and an improvement on the 3.2 percent slide reported for the year ending February.

The variety retailer said the deterioration was due to cost price pressures and the fact it has been selling more lower margin entertainment products and less higher margin goods and big ticket electrical items.

Panmure analyst Philip Dorgan said he believed there was "a profit warning in the announcement" but added that Woolworths "loses money in H1 and makes all its money in Q4, so there can be no explicit guidance at this stage of the year."

At 0945 GMT shares in Woolworths, which have fallen around 70 percent in the last year, were down 6 percent at 9.16 pence.

Woolworths last month rolled out its nationwide "Price Drop" campaign, which entails an average of a 17 percent drop in the price of everyday goods, in a bid to position itself as the high street's value retailer but warned it would hit profit margins in the short-term.

"If you take the price down the margin rate will come down but if you're selling more of them you make more cash margin in total. We're very pleased with Price Drop ... and we are pleased to be a value retailer," North said.

Sales rose 30 percent at 2entertain, its music and video joint venture with the BBC, but revenue fell 0.5 percent at the group's Entertainment UK and Bertram's wholesale divisions.

There was no news on the possible sale of Woolworths' 40 percent stake in 2entertain, despite much analyst speculation that a deal could happen this year.

"The prospect of corporate action -- either the disposal of 2e or break-up of the group could be an attraction, and Bish-Jones' departure may result in an acceleration of the latter, albeit the challenges to achieve either are substantial," said KBC Peel Hunt analyst Robert Brent in a note.

Woolworths is selling the leases on four London stores to Waitrose JLP.UL for 25.5 million pounds ($50.2 million), but denied it made the sales due to a bleak consumer landscape. "We work our portfolio and make property profits each year. This is a one-off transaction but it is larger than normal," North said.

Looking ahead, the company said it was "cautious about the consumer economy" as consumer spending power will be reduced by a number of factors including rising energy and food prices.

(Editing by Rory Channing)