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Woolworths has narrowed its first-half losses but has stressed that it remains cautious about the retail environment for the second-half of the year.

In a statement today the retailer confirmed that it had made an adjusted pre-tax loss of £59.2 million in the 26 weeks to August 4th, down from the £66.8 million reported for the corresponding period of 2006.

The well-known high street retailer said that total first-half group sales from continuing operations climbed by 16.1 per cent over the six months, while like-for-like sales across the business were up by 0.6 per cent.

Woolworths suggested that sales of products aimed for indoor use had benefited from this year's bad weather, with computer games and DVDs performing particularly well.

The retailer said that the launch of new games consoles such as the Nintendo Wii had seen the computer games market record significant year-on-year sales increases, while the firm also reported strong book sales on the back of the release of the seventh Harry Potter novel.

Woolworths added that a stronger release schedule in the DVD market had offset a decline in music sales, with the company expecting the positive performance to continue throughout the second half of the year.

Sales of Woolworth's Ladybird clothing range also grew over the first-half, while the retailer said that both the value and volume of sales from its new Worth It! branded range of goods had exceeded company forecasts.

However Woolworths revealed that the adjusted operating result of its entertainment wholesale business had declined by £7.2 million, with the drop partially blamed on "significant" operational change and "substantial" set-up costs.

Looking ahead the retailer said that recent interest rate rises and uncertainty in the financial markets made it difficult to predict levels of consumer demand for the key Christmas selling period. As such Woolworths says that it plans to focus on keeping costs down in order to sustain margins.

"Our first half performance is encouraging," said Woolworths chief executive Trevor Bish-Jones.

"Going forward, we remain cautious about the retail environment going into the important second half, so are continuing to run the business tightly, with a focus on cash, cost control and margins," he added.