The decision to place Woolworths' ailing retail and wholesale divisions into administration has raised fears for the future of its 30,000 staff and one of Britain's best known names on the high street. So what caused the failure of the 99-year-old firm.
Q: Why did it go bust?
A: The historic high street name, which opened its first store in Liverpool in 1909, has been under increasing pressure in recent years as customers have turned to supermarkets or the internet to gain better value. The group last month reported pre-tax losses of almost £100 million for the six months to the beginning of August, with sales diving 3.2% on a like-for-like basis.
Its problems were compounded in the summer by the surprise departure of chief executive Trevor Bish-Jones after a six-year run at the chain.
Shares in Woolworths have been decimated since its flotation in 2001 as the group's fortunes have turned. From a peak of more than 55p a share in 2005, the stock was suspended this week at just 1.35p.
Woolworths faced mounting difficulties with its suppliers, which saw it forced to pay cash when buying its stock because trade credit insurers were no longer prepared to insure suppliers to the firm.
That put further strain on a £385 million borrowing facility held through a syndicate of lenders, led by Bank of Ireland subsidiary Burdale Financial and GMAC Commercial.
Q: Why could it not be saved?
A: Woolworths' board was working on a restructuring plan that would have seen it sell the chain of retail stores and offload its debts to restructuring specialist Hilco for a nominal sum of £1, while also selling its 40% stake in DVD publisher 2entertain to joint venture partner BBC Worldwide.
The largest shareholder in the group, Ardeshir Naghshineh, who owns a 10% stake, was also trying to salvage the firm through a rescue deal. He said earlier this week he had held crisis talks with Woolworths' banks over a plan to save the business from sale or administration by selling off some of its store leases to raise cash.
It is thought that the Government was lobbying to persuade lenders to return to the negotiating table. But the banks are said to have taken a tough stance in light of Woolworths' debt levels and cash-flow woes and directors yesterday called in administrators Deloitte for the retail arm and wholesale division, Entertainment UK (E.UK).
Woolworths' publishing business 2Entertain is not in administration.
Q: What happens to staff?
A: It is unclear at this stage what will happen to Woolworths' 30,000-strong workforce, of which around 25,000 are employed by the ailing retail chain of stores and 5,000 at E.UK.
However, administrators have made it clear that money has been ring-fenced so that salaries will be paid to staff as normal while stores continue to trade. They are also reportedly working on protecting the firm's pension fund.
Q: What will happen to stores?
A: All 813 Woolworths stores opened for business today as administrators hope to keep as many open as possible during the key Christmas trading period.
The team from Deloitte is now working on plans to stabilise the business and sell all or parts of it, with the help of Hilco, which it has hired to help with the management of the retail business. Deloitte confirmed today it had received interest from "a number of parties" for both the retail arm and the firm's E.UK wholesaling operation in the past 24 hours.
Q: What happens to prices?
A: Deloitte may look to launch a cut-price sale to offload unsold stock as it seeks to generate cash for creditors. But there are fears in the retail sector that any plans to slash price tags could put further pressure on already-beleaguered high street operators in the run up to Christmas.
Q: What about the Woolworths brand?
A: The administrators are hoping to sell on a chunk, if not all, of the stores with the Woolworths brand intact. However their primary aim is to get the best return for creditors, which may see the portfolio broken up and sold on to other retailers, potentially marking the end of the 99-year-old retailer's presence on the high street.
Q: What will happen to shareholders?
A: Investors in Woolworths will have to queue up with the rest of the creditors of the retail chain for cash owed.
Unfortunately for shareholders, they rank at the bottom of the list, behind the banks, employees and suppliers.
