Steve Johnson takes on the high street's version of Mission: Impossible this week as sets out to resurrect Woolworths, the one-time giant of the retail sector.

Still settling into the chief executive's chair, the former head of Focus DIY has the biggest repair job of his career on his hands as he tries to reverse a decline that has left some commentators writing off Woolies' chances even of making it through to its 100th anniversary in November next year.

Amid fierce competition from discount rivals such as Wilkinsons, the supermarkets and fast-growing internet companies such as Play.com, Woolworths' stores are expected to record a loss of £20 million this year, despite sales of £1.7 billion.

Critics say that the stores have lost their way — one executive described them last week as “a shambles”. The shares are trading at less than 8p, valuing the business below £110 million. It was worth £350 million when it demerged from Kingfisher in September 2001.

One senior restructuring expert told The Times: “I'm fairly certain that we are seeing the beginning of the end of Woolworths. I think it will limp through Christmas, but there is a very strong chance that this time next year Woolworths may not be around, either in its current form or in its entirety.”

The first signs of a potential break-up of the business emerged last month when Malcolm Walker, founder of the Iceland frozen food chain, approached Woolworths with a £50 million offer for its 819 high street stores. The move was rejected as “unacceptable” by Richard North, Woolies' chairman, but now he needs Mr Johnson to come up with a survival plan — fast.

Few clues are expected to be forthcoming when Mr Johnson meets the City for the first time on Wednesday to present the company's interim results. He is expected, however, to step up plans to sell off underperforming stores. No quick decision is expected on whether to raise funds by selling off EUK, Woolworths' CD, DVD and books wholesale unit, or its 50 per cent share in 2 Entertain, a music and DVD publishing joint venture with the BBC.

One man who thinks that Woolworths can be saved is Sir Geoff Mulcahy, the former chief executive of Kingfisher, who insisted that his beloved Woolies would fly “higher and higher” when he decided to demerge the business seven years ago. He had bought the chain for £310 million in 1982 as head of Paternoster, the forerunner to the Kingfisher empire.

Sir Geoff told The Times last week that he was saddened by Woolworths' plight but was convinced there was a viable future if the new management improved operating standards and took Woolworths back to its roots as a value retailer. “I think it's very sad if you look at Woolworths today,” he said. “It seems to be going through the same death-throes as you saw with Woolworths in the US and in Germany. The business could be reinvigorated if management have a clear vision of what they want to do and the executional skills to implement it.”

When Franklin Winfield Woolworth, the American entrepreneur, opened his first Woolworths in Britain in Liverpool in November 1909, every product was priced at 6d or less — 2½ p in today's money. He did so on the back of a hugely successful American business, with its roots in a store opened in Utica, New York State, in 1879 and which was shortly to build the 57-storey Woolworth Building in New York — at 792ft, more than 240 metres, the tallest building in the world in 1913. By the 1950s Woolworths was entering its heyday in Britain, it was a national institution, and analysts believe that it needs to go back to what it did best then, piling it high and selling it cheap. One consultant said: “In the last five years, the likes of Poundland, Home Bargains and 99p Stores have been growing at around 15 per cent a year. They're doing exactly what Woolworths used to do. It's things, for example, like having a value hardware range. It doesn't sound very exciting, but things like fixtures, fittings, paint, door handles.”

There are signs that Woolworths is beginning to pursue such a strategy, but analysts are convinced that to achieve a breakthrough the company also needs to dramatically slim down its store portfolio and focus on those market towns where it is still the first port of call for anything from school uniforms to CDs.

Sir Geoff said: “It's a difficult business to run, it's complicated to run, but I think we demonstrated over the years that it could be done profitably.”

Over to you, Mr Johnson.

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