Struggling high-street chain Woolworths may be sold for as �little as £1, reports suggested yesterday, stoking fears over the health of Britain�s retail sector.

Struggling high-street chain Woolworths may be sold for as little as £1, reports suggested yesterday, stoking fears over the health of Britain's retail sector.

Company management admitted that negotiations with business restructuring specialist Hilco were under way, but remained tight-lipped over details of the talks.

In a statement yesterday, Woolworths said: "The board can confirm that it is in preliminary discussions regarding a possible offer for the retail business."

However, a spokesman refused to confirm or deny reports that a token £1 offer was on the table, and added: "There can be no assurance that any offer will be forthcoming."

Share prices for the 99-year-old chain plummeted in response to the news, plunging by more than 30% in early trading, and analysts took the firm's troubles as a sign that retailers are struggling to cope with the recent economic downturn. In the past year alone, Woolworths' share price has fallen by around 80%.

Hilco yesterday refused to release details about negotiations, but Paul McGowan, its UK chief executive, said the company was in "very early stage" talks with the group. He said speculation yesterday morning was premature.

Woolworths, which operates around 800 UK shops as well as a profitable DVD publishing and distribution business, has been under pressure in recent years from supermarkets and online retailers. Its problems have been exacerbated lately by reductions in consumer spending, which has also threatened well-known firms like MFI and ScS Upholstery.

In August of this year, Woolworths turned down a bid of around £50m for the retail side of its business, offered by a consortium including entrepreneur Malcolm Walker and Icelandic investor Baugur.

Woolworths was valued yesterday at £38m despite its largest shareholder, Iranian property magnate Ardeshir Naghshineh, claiming in last Friday's Retail Week magazine that the group was worth closer to £342m.

Any sale of the retail business is likely to need the backing of Bank of Ireland division Burdale Financial and GMAC Commercial Finance, which together lent Woolworths £385m in January.