NEW YORK -- Woolworth Corp., hit by huge writeoffs and sluggish operations, has a new problem -- accounting irregularities.
The $9-billion-a-year general merchandise and specialty store retailer said Wednesday that it will restate its financial results for the year ended Jan. 29 and may have to restate interim results for the prior year.
While Woolworth said it did not expect the statements to have an impact on the results for both years, the company has retained a law firm and an accounting firm to investigate charges of accounting discrepancies.
Woolworth currently operates about 8,300 stores, including 7,400 specialty stores and 960 general merchandise units.
Specialty formats include Foot Locker, Lady Foot Locker and Champs Sports, which carry athletic footwear and activewear; Afterthoughts/Carimar, accessories, and in Canada, two women's apparel chains -- Northern Reflections and Northern Traditions.
The company said the problem appears to be focused on gross margins and that the restatement would reflect corrected margins. It also admitted that it "is not in a position at this point to estimate the amount of any required interim restatements."
A special committee of outside directors has been appointed to investigate the alleged accounting irregularities and the procedures that resulted in the need for restatement.
Edward Johnson of Johnson Redbook Service said that it is difficult to assess the damage "because we have so little information."
"But," he added, "it does remind me of the Leslie Fay Cos. situation." About a year ago, Leslie Fay announced that it was investigating accounting irregularities that could wipe out all profits reported for 1992. As it turned out, not only were the profits wiped out, but large losses were discovered and the company ended up filing for Chapter 11.
The Woolworth announcement prompted Moody's Investor Service to review for possible downgrade the ratings on $1.5 billion in Woolworth debt. The Moody's review will focus on the results of the restatement and details of possible weaknesses in Woolworth's internal controls.
Woolworth currently carries a BAA1 Moody's rating on long-term debt and prime-2 rating on commercial paper. Moody's noted that it was possible the review would result in confirmation of the ratings.Standard & Poor's, which said it has had Woolworth on CreditWatch since March 7, said Wednesday that the latest announcement increases the chances of a deeper downgrade. Despite a Woolworth statement that it did not believe there will be a material impact on its financial condition, "the investigations involve the integrity of financial management and may reveal deeper problems than initially anticipated," S&P said.
The special committee is headed by John W. Adams, chairman of the audit committee and a Woolworth director since 1981. He has retained Paul, Weiss, Rifkind, Wharton & Garrison to work with the committee, and Paul, Weiss has retained KPMG Peat Marwick to help in the investigation. A Woolworth spokeswoman declined to provide more information on the accounting irregularities, stating, "The release speaks for itself."
In its last financial report, Woolworth showed a loss of $495 million for the year ended Jan. 29 on sales of $9.6 billion. The loss included $630 million in charges for shutting down or reformatting 970 stores.
There was also a charge of $168 million to cover the loss on the sale of 120 Woolco stores in Canada to Wal-Mart Stores. Before the special items, Woolworth reported an operating profit of $145 million in the latest year, against $574 million a year earlier.
Woolworth stock closed at 17 1/8, down 7/8 on the New York Stock Exchange Wednesday.
“What he has done at Vuitton is really exceptional,” said @gameofthrones’ actress Gwendoline Christie on @mrkimjones’ final show for @louisvuitton. “He has rebooted luxury in terms of making it commercial, viable and contemporary. And most importantly artistic. He has never compromised his artistic vision for the sake of commodity.” (📷: @zefashioninsider)
After seeing a demand for men’s wear from its customers, British contemporary women’s wear label @ariesarise has added a men’s wear component and will launch a unisex collection with @mrporterlive. The 20-piece collection includes jackets, denim, logo T-shirts and more with deconstructed ‘90s vibes. Set to launch on January 18, you can shop the pieces on Aries’ website and on mrporter.com. #wwdfashion
“And so spending so much time with a character who thinks like that, inevitability you try and analyze yourself and go back and think about your own demons and dark chapters that you had in your life,” says @thedanielbruhl of his role in TNT’s “The Alienist.” The show, set in the Gilded Age of New York, also stars Dakota Fanning and Luke Evans. Head to WWD.com to read about how 39-year-old Brühl prepared for the role and why he thinks the show is so relevant to today #wwdeye ( 📷: @Eriktanner)
Now that Celine Dion’s collection has topped $10 million in sales, the pop superstar, fashion icon and newly-minted industry player is eyeing growth in Asia. Read the full report by @tiffanyap, link in bio. #wwdnews #celinedion
“My personal philosophy to beauty is paying attention to oneself. I love to be outdoors, lots of fresh air, trying to take care of yourself as best you can. I always notice that comes through,” says Felicity Jones, the global face of @shiseido-owned @cledepeaubeauteus, which launches today. Head to WWD.com to read more about the actress’ love for beauty and how she prepared for her new role in “The Basis of Sex,” playing the young Ruth Bader Ginsburg. #wwdbeauty (📷: @dandoperalski)
Among the familiar faces at @off____white’s show was a surprise figure: Japanese artist @takashipom, pictured here on Wednesday morning. Other show-goers included @jerrylorenzo, who spoke about his upcoming project: a @nike collaboration for back to school, with designs inspired by his childhood on the West Coast. Sitting in the front row were Future, Don Crawley, @miguel and more. See the rest of the photos on WWD.com #wwdeye (📷: Stephane Feugere)
According to @laurentsai, former “Terrace House: Aloha State” cast member, she didn’t know she was auditioning for the Japanese version of “Real World.” “I was telling a couple of my friends and someone’s like, ‘That sounds a lot like Terrace House.’ I was like, ’No it can’t be.’” Turns out, it was. But Tsai isn’t just a reality star — she’s an illustrator who has worked with Starbucks Japan and most recently, she’s dipping her toes into the fashion world. Head to WWD.com to read about her time on the show, modeling and her art. #wwdeye (📷: @danieldorsa)
More changes are coming to New York Fashion Week: Beginning with the spring 2019 collection, @alexanderwangny will move his New York show to June from September, adopting a biannual schedule with collections shown in June and December. Additionally, the @cfda is planning for an official summer/winter fashion season taking place as soon as June and December 2018. Read more about the upcoming changes on WWD.com. #wwdnews #wwdfashion (📷: @slovekinpics)