Like-for-like sales for the year ending January 28 were down 3.9 per cent. Total group sales fell 4.1 per cent, with retail sales dropping 8.3 per cent.
The variety group said it had experienced a 'slow' start to 2006 and expected conditions to remain 'challenging' for the remainder of the year.
Woolworths chief executive Trevor Bish-Jones said: 'This was a year in which the tough conditions on the high street overshadowed the continued improvements in the underlying infrastructure of our business and a creditable trading performance.'
The group said that over the course of the year it has 'put in place the building blocks for an online and in-store ordering retail proposition'.
Sales at the group's entertainment wholesale and publishing business EUK increased 9.5 per cent. However, it warned that the loss of its music, DVD and games contract with Tesco 'will lead to a further reduction in profitability'.
Since its demerger from Kingfisher, the group has been subject to increasing takeover speculation. Last Friday, Icelandic Group Baugur increased its stake from 9 per cent to 10.2 per cent.
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