Woolworths has unveiled a 74% drop in full-year profits, blaming a fall in entertainment and confectionery sales.
Competition from supermarkets ate into sweets sales
Full-year pre-tax profits sank to £16m from £61.5m a year earlier as like-for-like sales fell by 6.6%.
While sales of toys and stationery did well in the year to 3 February, music and DVD sales were hit by falling prices and increasing competition.
Looking ahead, the group said the new financial year had begun well but conditions remained "challenging".
"The environment ahead is going to be fairly challenging and we are going to look to control costs like we did last year," chief executive Trevor Bish-Jones said.
Falling sales at the group led to a £12.9m loss from Woolworths' continuing High Street operations, compared with a profit of £17.1m last time.
As well as falling entertainment sales, the group said business was hit by Sony's decision to delay the launch of its PlayStation 3 console until March.
It also said Nintendo's launch of the Wii games system with insufficient numbers of units to satisfy demand had also knocked sales.
But while its High Street stores suffered, the group's entertainment wholesale and publishing subsidiaries EUK and THE fared well, with sales increasing 29.7%.
And despite the group losing a supply contract with Tesco it had made "excellent progress" in replacing the lost revenues by landing a three-year deal with Virgin.
The agreement to supply books, games, music and DVDs to Virgin Retail could generate up to £250m a year in revenues for Woolworths.