Losses before tax at Woolworths widened by nearly 10 per cent in the first half as the struggling high street retailer was hit by the downturn in consumer sentiment - but underlying sales falls have stemmed in the past eight weeks.

Trevor Bish-Jones, the chief executive, bemoaned the "tough trading conditions" as he set out a radical cost-cutting programme that is targeting savings of £25 million in the second half of the year.

The retailer has already saved £9.3 million in costs during the first half.

As he reported that first-half losses had risen by £3 million to £35.9 million before tax and exceptionals, Mr Bish-Jones said it was unlikely the retailer's "flat" margins and slipping underlying sales would "move into positive territory" anytime this year.

But he noted an "improving trend" in like-for-like sales over the past eight weeks - where comparable sales have fallen by 1.7 per cent, compared with 4.4 per cent reported in July.

"We have to plan for the worst and hope for the best. Provided we deliver on our cost savings we will deliver against the bottom line," Mr Bish-Jones said.

The tough measures introduced by Mr Bish-Jones include a recruitment freeze, a "small" redundancy programme at the head office where between 20 and 30 jobs have gone, deferred pay awards to store and senior staff and a cut in the retailer's marketing budget.

Woolworths will also try to renogiate some of its major contracts for support services.

Further cost-cutting measures are targeted for the rest of the year, including from the retailer's new 460,000 square foot warehouse in Bedford, which is expected to reduce distribution costs.

As he again highlighted the crucial Christmas trading period for Woolworths, Mr Bish-Jones said the retailer was already "well advanced" with its festive preparations and revealed plans to enable customers to access the gifts usually made available online also in-store.

Mr Bish-Jones said it would be an "aggressive" and "competitive" festive season but predicted strong Christmas sales of the forthcoming Little Britain 2 DVD and a "Freddie Flintoff's Cricket Nightmares" offering coming from Woolworths 2Entertainment joint venture with the BBC.

The retailer traditionally posts a first-half loss, relying for much of its revenues on Christmas trading. But Woolworths has clearly suffered the effects of a malaise on the high street that has seen rivals report lower sales and profits.

As he noted stronger half-year sales of toys and electrical goods, but weaker sales in home items and clothing, Mr Jones said: "The tough trading conditions have had an impact on the performance of the retail chain. We have made good progress in our entertainment wholesale and publishing business."

He added: "Our expectation is that consumer confidence will remain low and that customers will need to be encouraged to spend. As a consequence, we have considerably improved the underlying value in our offer.

"We believe this approach, together with the significant cost saving initiatives put in place, will maximise sales and profitability over the key period ahead."

Shares in Woolworths rose 1.5p to 35.25p in early deals, valuing the retailer at more than £490 million.

For detailed data on Woolworths shares click here

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