Woolworths Group Plc is to continue supplying CDs, videos and computer games to British supermarket giant Tesco Plc after the pair unveiled a new deal on Monday aimed at better co-operation.

Woolworths Group Plc is to continue supplying CDs, videos and computer games to British supermarket giant Tesco Plc after the pair unveiled a new deal on Monday aimed at better co-operation.

The British retailer said the new agreement to act as Tesco's major supplier of entertainment products until at least the end of February 2007 would "improve the efficiency of the entertainment supply chain for the benefit of both parties and Tesco's customers".

Numis Securities analyst Rory Codd said: "The announcement will come as a relief to shareholders as the possibility of losing the contract was feared".

Codd estimated the old contract was worth around £10 million ($18.4 million) to Woolworths, or around 11% of annual profits. "We believe that at the margin the new terms to be slightly tougher. The result, however, should have zero effect to earnings going forward this year and next," he said.

At 1135 GMT, Woolworths shares, which have underperformed other general retailers by 10% this year, were up 3.0% at 43.5p to be the top mid-cap stock gainer in London and value the company at around £615 million ($1.131 billion).

-- Reuters

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