Deal hope for Woolies but price war looms

Analysts say Deloitte, appointed to try to salvage the business, will have to hold a fire-sale of most stock, forcing rival retailers to try to compete.

One analyst said: "I've no doubt that is what they will do. They will try to get rid of stock because the debt is placed against that and not much else. The quicker they get rid of the stock, the sooner they're able to shut off the overheads like staff costs."

He said such a sale would have a major impact on toy retailers in particular.

"That is going to have a follow-on impact on the likes of Argos," he said.

Deloitte is also likely to sell off video games and music on the cheap, affecting HMV and Zavvi, the analyst said.

But another analyst said: "It really depends how serious Deloitte is about being able to find a buyer. If they seriously think anybody might buy the thing, they might want to keep some discipline on prices. But if they are just going to try and run it for cash through Christmas, it's just going to be a case of liquidating as much stock as they can as quickly as possible."

The administrators today claimed that "a number of parties" had expressed an interest in buying both for the shops and the firm's E.UK wholesaling operation in the past 24 hours.

But a buyer would have to negotiate with many interested parties - including more than 600 individual landlords of Woolies' 813 stores.

The collapse of Woolworths has cast uncertainty over the future of the chain's 30,000 staff. Deloitte's reorganisation services partner Dan Butters said today: "We are working hard to ensure that any sale of the business, in whole or part, will preserve jobs."

Deloitte said that the 99-year-old retailer will be kept open for business. It said Woolworths branches will remain open past Christmas and employees in stores will be paid.

Woolworths' most attractive business is likely to be its E.UK arm, a wholesaler of DVDs, music and games. Although this business is its most successful, it was also the arm most responsible for piling up its £385 million of debt. Analysts said Woolworths' management had been fulfilling their supply agreements with big customers such as Morrisons and Zavvi at the expense of their own stores for fear of losing major clients. That practice was likely to continue under Deloitte's management.

Hilco, the restructuring specialist that failed to buy Woolworths' stores for just £1 last week, has been appointed by Deloitte as an agent to help to manage the retail arm.