Value retailer Instore has reported like-for-like sales down 1.9 per cent for the five weeks to January 3 as it was hit by the heavy discounting at Woolworths in the run-up to Christmas.

For the 18-week period ending January 3, total sales were up 0.5 per cent and down 0.7 per cent on a like-for-like basis.

The retailer said its food and toiletries offer has performed well and the pilot of its new store layout, now in 19 outlets, has shown “an encouraging performance”. It has continued to renegotiate its cost prices through direct sourcing, and to reduce its cost base.

In a statement, the retailer said: “Progress towards restoring the longer term profitability of the company’s core business continues and the board remains confident, despite the current difficult trading environment, of the longer term outlook.”

If the group’s Ponden Mill stores are excluded, the retailer expects to report a similar level of loss pre-exceptionals for the year as was reported in the year ending March 1, 2008.

Instore said Ponden Mill’s performance – which it bought in December 2007 – has been disappointing. Of the 33 stores originally acquired, 13 have now closed and the retailer is “considering various options for the future operation of this part of the group”.

Instore expects to report a full-year loss for the group of between£4.5m and£5m for its year ending February 28. However, it said its banking partners remain supportive of the initiatives being taken to restore the company to longer term profitability.