Woolworths is in talks with distressed retail specialist Hilco over the sale of its 815-store chain.

Woolworths said that it had held 'preliminary discussions' regarding a possible offer for the retail business in an announcement that sent its shares plunging by a quarter.

In its latest statement to the Stock Exchcange this morning the retailer said: 'The Board of Woolworths notes the recent press speculation.

The Board can confirm that it is in preliminary discussions regarding a possible offer for the retail business. There can be no assurance that any offer will be forthcoming.'

Shares in Woolworths, which were suspended before the open, fell by to 1.23p or 32 per cent to 2.55p, to valuing the company at £37.8m.