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Woolworths has revealed that retail sales for the last three months showed a 3.2 per cent slide.

The business, which sells everything from video game consoles to children's toys, also said today that, despite the drop, "it is anticipated that Woolworths Retail will return to profitability in the current year".

"While the absolute level of profitability will be low, this is an important reversal of the prior year loss and will have been achieved against a background of tough competition and reduced consumer confidence," a company statement said.

The results are in line with expectations given the trouble experienced in the retail sector over the holidays as consumers tightened their wallets and made fewer shopping trips.

The loss reflects "fierce discounting" of its electrical products, such as flatscreen televisions and computers. However, the retailer also noted that "year-end profits will be ahead of the prior year", with total sales increasing by 11.2 per cent.

Sales from the business' entertainment wholesalers, EUK and Bertrams, were 46.7 per cent higher than in the previous year, the release said. However, it also said that it faced "higher than anticipated operating costs" in the 49 weeks to January 12th 2008, which may "depress EUK's profitability in the current year".

The statement also said that sales for its 2entertain business were strong for the Christmas period, with cumulative sales close to 12 per cent.

Trevor Bish-Jones, chief executive of Woolworths, commented that "in spite of volatile and highly competitive markets, all parts of the business took steps forward".

In spite of this, the troubled company, which operates 820 stores in the UK, said that it remained "concerned" about consumer confidence and that it would approach 2008 with caution.

Woolworths' share price has dipped by 11.7 per cent to 8.83p in early trading today.