F.W. Woolworth Co. yesterday said it will shut down its entire Woolco discount chain in the United States, eliminating 336 stores that employ 25,000 people.
The closings early next year will wipe out 14 stores with about 1,000 employes in the Washington area, where Woolco is the largest discount retailer.
Woolco is the nation's third largest discount chain, with sales of $2.1 billion last year, and is the biggest retailer to go out of business since W.T. Grant closed in 1976.
None of Woolworth's other North American operations will be affected, including its variety stores and 119 Woolco stores in Canada.
Despite its huge sales, the 20-year-old Woolco chain never produced consistent profits for the parent Woolworth company, which with total sales of $7.2 billion is the fourth largest retailer.
Woolworth officals said the stores will stay in business through the usually profitable Christmas season, but did not set a specific closing date.
The spokesman would not say how many workers would be laid off. "The company does have a program to relocate employes into some of its other businesses, and will try to do that," a company official said. "The others, we will try to help find jobs elsewhere."
The announcement shocked Wall Street analysts and Woolco employes, many of whom thought Woolworth was committed to keeping its U.S. discount chain open despite Woolco's operating loss of $19 million in 1981 and $21 million in the first half of 1982.
"I was just going through some articles that say Woolco was turning itself around," said Edward F. Johnson, an analyst at Prescott, Ball & Turben. Johnson said Woolworth's decision eight months ago to bring in Bruce G. Allbright to run the chain brightened prospects for Woolco's survival.
Allbright was president of the successful Target discount store division of Dayton-Hudson Corp.
Allbright "was restaffing and setting up a new buying department," said Johnson. "They were doing all of that. Now, they're closing. This is quite a surprise."
Some Woolco employes learned that the stores would close from reporters calling to question their bosses. A woman at a store in Burke, who answered the telephone for Woolco store manager F. Moreau, began crying.
"Thanks for making my day," she told a reporter. "Thanks a lot." Moreau said he had not had a chance to inform his staff before the phone calls began. "I just found out myself," he said.
However, Woolworth had sent signals that it was serious about cutting losses. Earlier this week, the company said it was discussing possible sale of its 52.6 percent interest in F.W. Woolworth PLC, Woolworth's British subsidiary. The British division lost $5.5 million in the first half of this year.
Edward F. Gibbons, Woolworth's chairman and chief executive officer, also waved a red flag in June at the company's annual meeting, where he described U.S. Woolco operations as "the company's major weakness."
Gibbons made similar comments yesterday:
"Although we have taken a number of constructive measures in dealing with the Woolco problem -- including a reduction in store size, more effective administration, marketing and merchandising, and the closing of some units -- the board of directors has agreed with management that the company would be better served by focusing its financial and managerial resources on its other more profitable businesses," Gibbons said.
Woolco accounted for about 29 percent of Woolworth's sales in the company's last fiscal year -- $2.1 billion of $7.2 billion. The company made a profit of $82 million. Without Woolco, Woolworth would have had a net income of $147 million last year, Gibbons said.
"We believe that the figures indicate that Woolworth will be a more profitable company once freed from the burden of U.S. Woolco's disappointing performance," he said.
Woolworth said it would set aside $325 million in the current quarter to cover the estimated after-tax loss from closing its U.S. Woolco stores.
Woolworth's profitable Canadian Woolco chain -- 119 stores with $1.3 billion in sales last year -- won't be closed.
The company's other businesses include 1,300 Woolworth variety stores and several specialty chains: Kinney Shoe Corp., the nation's largest shoe-store chain with 1,564 U.S. stores; the 275 Foot Locker stores which sell athletic shoes; the Richman Brothers, a 227-store men's wear chain; 109 Anderson-Little family clothing stores; and about 40 J. Brannan, off-brand clothing stores.
There are several major discount chains that are not represented in the Washington market and could be interested in taking over some or all of the Woolco locations, which were leased, not owned by Woolworth.
Among those mentioned in the past by industry analysts are Target; Caldor, based in Norwalk, Conn., a division of Associated Dry Goods Inc., and the Bradlees division of Stop & Shop Inc., of Boston.
No senior executives of Bradlees or Caldor could be reached for comment. A Target spokesman said, "We are a growth company. We take a look at every major market in the United States to see if it would be profitable to do busines there, but we have no plans for Washington."