British wholesale distributor Entertainment U.K. (EUK), part of the struggling Woolworths Group, has insisted it is trading as normal amid concerns in the biz as the crucial fourth quarter arrives.

Woolworths Group issued a statement that appeared to rebuff any suggestion that suppliers are demanding payment up front from EUK, denying them credit because insurance is no longer available. But Woolworths has admitted that credit insurers are “tightening” their conditions; these policies are designed to protect suppliers to EUK in the event of Woolworths Group’s situation deteriorating further.

The move by credit insurers appears to be the result of the global credit crunch as well as the recent poor results posted by Woolworths (, Sept. 17). The retail giant had a loss of £99.7 million ($177.34 million) for the six months up to Aug. 2, although EUK has performed better than the retail division. The group losses widened from £63.8 million ($113.45 million) in 2007.

“While it is true that some credit insurers are tightening terms of trade, we are trading as normal with our suppliers and will continue to do so,” said a Woolworths Group statement. “Entertainment UK (EUK) continues to work closely with all of its customers and suppliers to ensure a successful Christmas period for all parties."

EUK is the main wholesale distributor in the U.K. of music product and other entertainment formats, with retail customers including Zavvi, Asda, Sainsbury’s and the 815-store Woolworths chain.

"The Board of Woolworths Group is comfortable with the financial and cash position of the Group,” the company added in its statement. “We continue to work closely with suppliers and credit insurers in what is clearly a difficult environment for the retail and wholesale sectors.”

Pete Thompson, managing director of sales and distribution company PIAS U.K., told he is monitoring the situation. PIAS U.K. focuses on sales and partners with distributor and manufacturer Sony DADC, who supplies the music product to EUK.

“There are issues linked to the financial results of Woolworths,” said Thompson. “We are trading relatively normally with EUK.

“We are aware of the situation surrounding EUK but it’s not affecting trading at the moment. It’s just a case of trading within our insured credit limit.”

PIAS U.K. is currently working on the new album by melodic rock act Travis, “Ode To J. Smith” (Red Telephone Box), and preparing for the Oct. 6 release of Oasis’ “Dig Out Your Soul” (Big Brother Recordings).

The fourth quarter and Christmas period will be a key period for sales in a struggling physical market.

“The supply line is too crucial and everybody will do everything they can to make sure it functions,” said Thompson. “It’s a crucial time for the whole industry.”