Analysis
By Declan Curry BBC Breakfast's business presenter

The retailer has turned in another trolley load of misery. Is the store being wrecked by the man who used to run Railtrack, or is the retail industry's latest hero, battling against impossible odds?

It's famous for its pic'n'mix, but you'll have to look hard at the latest figures from Woolworths to find any caramels amongst the empty wrappers.

In the midst of a raging consumer boom, its stores couldn't manage a rise in sales at all at the start of this year.

It comes just weeks after Woolworths admitted its sales fell over the critical Christmas period, and its profits had slumped by 60%.

Given the rude health of the rest of the High Street, how can Woolworths be in such a state?

Jack of all trades

It is, of course, a fairly unusual beast in the modern shopping world.

Woolworths has spent a fortune developing new stores that stay open into the night, offer more health and beauty products and have an on-site pharmacy. The problem is - they're not working.

While most chains now specialise in one or two things, Woolworths is still a jack of all trades.

For many small and medium-sized towns, it's the heart of the High Street, a department store writ small, selling clothes, kitchenware, home furnishings, toiletries, toys, sweets, stationery, CDs, DVDs and videos.

But spelling out the range like that only makes the picture look even worse.

More and more of these types of goods have been walking off the shelves. The problem for Woolies is - they've been walking off everyone else's shelves, not its own.

Just look at some of the more recent announcements from the other big High Street names.

Among the clothes sellers, Arcadia, the company behind Top Shop, Burton, Dorothy Perkins and Miss Selfridge, saw sales rise 9% over the last year. Next also saw its high street sales go up by 9%. And at the children's clothes seller Adams, sales went up by 5%.

Woolworths - as a whole or in its parts - appears to be the runt of the retail litter

In the world of kitchenware and home furnishings, the long-stricken Laura Ashley scored a direct hit with a 15% rise in its home furnishing sales.

In toys, Argos had a 13% rise in sales - on top of an already strong Christmas. And a recent survey by the market researchers Mintel named Argos - not Woolworths - as the most popular toy retailer in the UK.

You get the picture. Woolworths - as a whole or in its parts - appears to be the runt of the retail litter.

Poison pill

But if you think all this is bad, over at Woolworths, they're giving thanks for one thing.

That it wasn't much worse.

Woolworths has only been around as a separate company for less than a year. For the past 20 years, it was owned by the DIY and electrical giant Kingfisher.

And those who know Woolworths say these were the wilderness years.

They claim Kingfisher held back money that Woolworths needed to sharpen up its act - because they knew it was going to be sold off in a few years time. That's why so many of its current stores look drab and dull, and unappealing to shoppers.

The tale of the everlasting Christmas trees - unsold one year, then outselling new ones when dragged out the basement the following year - is a neat example

And when it eventually was sold, Kingfisher gave it a poisoned leaving gift - it burdened it with some of Kingfisher's own debt.

Against that background, it's not over-stating it to say that some people - inside and outside the company - feared Woolworths wouldn't survive its first year of independence.

To the rescue?

The fact that it did is being credited to one man - the man who used to run Railtrack.

Gerald Corbett was rarely out of trouble when he headed up the railway company. But at Woolies, he's being hailed as a miracle worker.

Once Woolworths was set free from Kingfisher's grip, Mr Corbett had to put on his overalls, and clear out the trash.

The first bit of trash he had to deal with was the massive quantities of stock on the shelves that just couldn't be sold - and in fact, hadn't been sold for years.

Old Woolworth's management of its stock was shockingly bad. The tale of the everlasting Christmas trees - and everlasting in more ways than one - is a neat example.

Up a gum tree

A batch of trees arrived at one store one particular year. Only some of them were sold. The leftovers - instead of being returned to a central depot so the company would know what was selling and what wasn't - were put into boxes in the shop's own basement.

They were brought back upstairs for the summer sales - but no takers.

Woolworths needs to ask itself - what is it for nowadays?

Then, next Christmas, they were joined by a host of fresh Christmas trees, sent by the depot which didn't know the old ones hadn't been sold.

So now there are two batches on sale - the old one at cut-price, the new one at full price.

Guess which sold? The cheap ones, of course.

And guess what happened to the new, expensive leftovers? Back downstairs, for the whole charade to begin again.

Some stores were awash with stock they couldn't sell - tying the company's money up in useless goods. And worse, they also cut the firm's profit margins, because the old goods selling at a discount cannibalised sales of new, more profitable, stock.

On and on

By all accounts, that sort of nonsense has now been stopped. The supply chain has been sorted out, and the useless, unsold stock disposed of. That's the reason for the last slump in profits - clearing out the trash.

It frees up cash for other things now, and should restore profit margins in the years ahead.

So now it's on to the next stage. Woolworths has spent a fortune developing new stores that stay open into the night, offer more health and beauty products and have an on-site pharmacy.

Having done the donkey work, and set out the strategy, Mr Corbett can retire to the Chairman's office and let the retail experts get on with the detail

The problem is - they're not working.

These stores - and there are only 20 of them - lost �5m last year, and are expected to lose another �3m this year.

The licences to run the pharmacy counters cost too much - prices of up to �250,000 a time are not unknown. So future expansion is prohibitively expensive.

And the health and beauty products - the soaps, shampoos, bath gels - are supplied by Superdrug, which is no longer part of the same group and therefore could raise its prices when the contract comes up for renewal in January.

So they're the next to go. The stores won't be shut down - but they'll be turned back into regular Woolworths stores, as far as possible.

Instead, Woolworths will spend its money on refurbishing its most run-down local stores. At least 200 of them need more than just a lick of paint.

Picky

But what happens next? Well, Mr Corbett is taking a back seat. Having done the donkey work, and set out the strategy, he can retire to the chairman's office and let the retail experts get on with the detail.

That's what good bosses do - pick the players and conduct the orchestra.

The new chief executive, Trevor Bish-Jones, is well regarded in the City, and is seen as exactly the man it needs to get on top of its biggest problems.

But Woolworths needs to ask itself - what is it for nowadays?

Retail experts say shoppers are more discerning - when they want something in particular, they want to choose from a wide range of goods in specialists shops. With its more general approach, that's not something Woolworths can really offer.

So does it focus its business - concentrating on one or two things, like its strong entertainment division, and getting rid of the rest?

Or does it stay as it is, and act as a cash cow that pays for expansion into new developments?

The right decision - to borrow its advertising slogan - could be well worth it.

The wrong one could lead Woolworths down the path of other, long-established, well loved names. If they get it wrong, the ghost of C&A and Littlewoods could haunt Woolworth's management for many more Christmases to come.