Woolworths has confirmed it is in talks to sell its retail business after media speculation suggested the firm was seeking to offload its stores for as little as a £1.

In a statement to the stock exchange, Woolworths said: “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.”

The company was forced to issue the statement after a report in the Times suggested the retail business could be sold off to turnaround specialists Hilco for a nominal £1.

Any buyer will be taking on debts of around £295 million and a £100 million pension fund deficit.

Shares in Woolworths had plunged over 32 per cent by 10:24 GMT on the speculation, wiping around £18 million from its value.

A sale of the retail arm would leave Woolworths with two businesses: 2entertainment, a DVD publisher, and EUK, a wholesale distributor of home entertainment products.

Woolworths has been hit hard by the consumer downturn and sales have fallen sharply.

The group appointed a new chief executive in August in a bid to turn around the business, former Focus DIY head Steve Johnson.

Mr Johnson has faced pressure to break up the group. In August the founder of frozen food chain Iceland made a bid for the stores, which was rejected, and the BBC has reportedly offered to buy Woolworths out of its stake in 2entertainment.

Woolworths, a subsidiary of its US parent, was founded in the UK in 1909, with the first store opening in Liverpool.