U.K. retailer Woolworths has admitted to a "very challenging" Christmas, reporting a like-for-like sales dip at its 800-strong chain of 3.2% in the 49 weeks ending Jan 12, 2008, compared with the same period in the previous financial year.

The household goods and entertainment merchant has declined to release Christmas trading figures for its stores. The retail division made a loss of £12.9 million ($25 million) in the last financial year (2006-2007), while Woolworths Group made a profit of £21.8 million ($43 million). The company says it expects the core retail business return to profitability this year, albeit at a low level.

Woolworths says it anticipated reduced consumer demand and cut back on stock, while focusing on profitable sales rather than heavily discounted items such as electricals. The retailer admits it remains concerned about the underlying level of consumer confidence and says its performance came against a backdrop of volatile and highly competitive markets.

"Christmas was a very challenging time for the Group," said chief executive Trevor Bish-Jones in a statement. "However, in spite of volatile and highly competitive markets, all parts of the business took steps forward. We are pleased that the progress made across the Group through this year is expected to lead to an improvement in profitability, including Woolworths Retail returning to profit."

Overall sales for the Group increased by 11.2% thanks to the performance of its other businesses. There was a sales surge of 46.7% for book and entertaiment distributor EUK; and 2entertain, a joint DVD production and distribution venture with the BBC, saw sales increase 11.7%.

According to figures from labels body the BPI, Woolworths accounted for 10.6% of U.K. album expenditure in 2006, plus 26.9% of singles expenditure. Figures for 2007 are not yet available.