WOOLWORTH MAY SPIN OFF ATHLETIC UNIT
NEW YORK — Woolworth Corp., in reporting that earnings for the fourth quarter would be disappointing, said Monday it is considering a plan to spin off its athletic footwear and apparel division.
Woolworth said weak consumer spending and increased promotions will result in fourth-quarter operating results falling below year-ago figures and earnings for the full year will not come up to analysts’ expectations.
In addition, Woolworth said it will take a special charge for the revaluation of long-lived assets. A spokeswoman for the company said that the amount of the charge is still being worked out.
Woolworth’s stock rose 1 1/4 to 11 1/8 Monday on the New York Stock Exchange.
In last year’s fourth quarter, Woolworth earned $90 million, or 69 cents a share. For the full year, the company reported earnings of $47 million, or 36 cents a share, after a $30 million special charge.
The consensus for 1995 earnings had been about 41 cents a share. However, in view of Monday’s announcement, 1995 earnings should come in at about 20 cents a share, according to Jeffrey Edelman, analyst at Deutsche Morgan Grenfell/C.J. Lawrence.
New York investment firm Greenway Partners has proposed the spinoff of the athletic footwear segment for consideration at Woolworth’s annual meeting this spring. Woolworth declined to disclose the number of shares held by Greenway, and the investment firm could not be reached.
The segment Greenway wants spun off to shareholders comprises Foot Locker, World Foot Locker, Lady Foot Locker, Kids Foot Locker, Athletic X-Press and Champs Sports Stores, which in 1994 constituted $3.5 billion out of $8.3 billion in total revenues.
Edelman pointed out that about two months ago Woolworth management told analysts that it planned to keep its operation intact and work to turn it around.
“I don’t think, in the case of Woolworth, the sum of its parts would be greater than the whole. Limited’s spin-off plan hasn’t done its stock any good and, although the jury is still out on May’s plan to spin off its shoe division, the stock hasn’t done much. Only Sears, Roebuck has had real success with spinoffs, and it had some very strong businesses,” Edelman said.
Despite Woolworth’s poor operating results, the firm saidt its finances remain strong. It noted that short term debt at the end of 1995 is expected to be about $700 million lower than a year earlier because of substantially improved cash flows and the sale of $290 million in long-term debt. Woolworth currently has a $1.2 billion revolving credit agreement, including $1 billion that runs until April 1998, the company said.
It also said inventories are more current and expected to be about $200 million lower than prior year levels. Also, cost reduction in 1995 exceeded the $100 million target.
— Fairchild News Service