Woolworths revealed it has enjoyed a boost from the dismal summer yesterday due to rainy days encouraging sales of DVDs and computer games.
But the high street retailer struck a note of caution about the run-up to the key Christmas period because of higher interest rates and turmoil on the financial market.
Its chief executive Trevor Bish-Jones said interest rate rises and uncertainty in the markets make it difficult to predict consumer demand over the festive season. However, he said Woolworths had a lot of defensive qualities, pointing out that at times of recession parents tend to continue spending on children at Christmas, and "children have the habit of growing", which means parents have to continue shelling out on new clothes.
DVDs of Harry Potter, Shrek and Transformers are all expected to be big sellers this autumn and winter, he added. "I am most excited about Transformers as they also make really good toys," he said.
The company reduced its losses in the first half of the financial year. Pre-tax losses for the six months to 4 August were £59.2m, against a loss of £66.8m in the same period last year. Like-for-like sales rose 0.6 per cent.
Mr Bish-Jones said this was partly because of the weather, but was also due to the launch of the Worth It branded range, a value range of 500 products across every category, which compete on price with the value ranges of the major supermarkets.
Mr Bish-Jones said the Worth It range was targeted as 2 to 3 per cent of sales but instead was accounting for 4 to 5 per cent.
Woolworths is to introduce Christmas cards, crackers and decorations in the range in October.
The launch of Harry Potter and the Deathly Hallows also gave sales a boost, as although it was aggressively priced it drove footfall through stores.
Mr Bish-Jones added that 2entertain, the company's joint venture with the BBC had put in a strong performance, helped by demand for the television series Planet Earth, while the EUK entertainment division "was in better shape" after significant changes, including the loss of a contract to supply Tesco with DVDs, CDs and computer games.
The company would focus on cash, cost control and margins in the second half, he added.
Christian Koefoed-Nielsen, an analyst at Panmure Gordon, said he believed the core chain has a "good chance of breaking even this year".
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