Shares in Woolworths weakened yesterday after Australia's largest retailer revealed another quarter of slowing sales growth, especially in its key Australian supermarkets chain.

The shares traded in the red all day, finishing down 49c at $26.19, down 1.8%.

Woolworths said that total group sales for the 12 months to June 27 for its supermarkets, Big W discount chain, Dick Smith Electronics, petrol, NZ and other businesses rose 4.2% to $51.7 billion, in line with its lowered guidance for sales growth of 3% to 6%.

That compares to the 7.5% rise in 2009 group sales over 2008.

Guidance was cut in the third quarter report when the slowdown appeared, from the previous guidance for sales growth for the year in the high single digits.

There was no mention of earnings guidance in yesterday's statement, so presumably it is still on track for a rise of between 8%-11%, as reaffirmed in April's 3rd quarter sales report.

But that will only have come from a tight hold on costs, so standby to be ready to scrutinise the earnings report very closely in a month's time.

Headline sales for the group rose to $11.6 billion in the 4th quarter, up 3.9% on the same quarter of 2009 when stimulus spending was the major booster.

The slowdown continued in its supermarkets and liquor business in Australia, as well as in Big W and the consumer electronics business housed under Dick Smith.

The company told the ASX in its 2010 sales report yesterday that fourth quarter same-store sales for its core Australian food and liquor operations rose 1.8%, slightly faster than the third quarter's rise of 1.6%.

Excluding liquor and the supermarkets saw same store sales growth of less than 1% in the quarter, which is very, very poor.

Headline sales growth for the quarter in the Australian supermarkets and liquor business was 3.4% (3.3% in the third quarter).

That meant fourth quarter sales growth on both a topline and same store basis was less than half the fourth quarter 2009 rate of 7.9% and 4.0% respectively.

Sales growth for the supermarkets and liquor business was 5.1% for the year (3.3% on a same store basis).

That compares with headline sales growth of 7.4% in 2009 and same store sales growth of 4.1%.

CEO, Michael Luscombe, said in a statement that the company was "pleased to report a $2.1 billion or 4.2% increase in sales across the group in what has undoubtedly been a challenging year for the retail sector.

"Our business-wide strategy to deliver optimum value for our customers has resulted in solid sales at a time when consumers are doing it tough and tightening the purse strings.

"In particular, our Supermarkets Division has responded well to customer demand for value and has further enhanced its position in the market."

Woolies shares spent all day in the red, although the losses contracted as the day went on. The shares closed down 47c at $26.21.

A combination of the disappearance of the impact from the federal stimulus and six interest rate rises have had an undeniable impact, especially in the consumer electronics area of Dick Smith.

But more than 330,000 jobs were created across the economy in 2009-10, which should have meant more business for retailers like Woolies, as the economy generally has continued to grow.

And car sales continue to be strong and interest rates play a big part in their purchase.

But retailers are facing tough comparisons with last year, when the stimulus in the form of cash handouts lifted consumer spending and retail sales.

Interest rates only started rising last October and all happened in the space of seven months.

And we shouldn't discount the stepped up competition from Coles under Westfarmers.

It is spending heavily on promotion (such as sponsoring Masterchef and leveraging off that); it's cutting prices and forcing Woolies to react.

Coles is also marketing value for money cleverly, again forcing Woolies to react to protect sales by discounting more aggressively than it probably has wanted to.

Seeing Woolies started the discounting late last year, it has been caught by Coles smarter marketing and forced to go on with the cutting.

And Coles has aggressive new management who have lifted the operational performance of great rival, Woolies, with all divisions from supermarkets, to Target being reworked and money spent on updating stores and other outlets.

Woolies Australian food and liquor sales for the year were $34.68 billion, an increase of $1.7 billion, or 5.1%, over the year before.

For the full year petrol sales were $5.5 billion, in line with the year before. Petrol comparable sales fell 1.7%, but comparable volumes increased 0.7% over the year.

New Zealand supermarket sales for the year were $NZ5.2 billion ($A4.1 billion), up 4.6% on a headline basis and 4% on a same store basis.

Big W sales fell 1.7% over the year to $4.2 billion.

Comparable sales for the full year declined 3.2% and Woolies said this "primarily reflects the cycling of the prior year government stimulus package with sales growth last year of 10.5 per cent, combined with price deflation in key categories including home entertainment, toys and sporting goods".

Total consumer electronics sales grew by 3.4% over the previous year.

Hotel sales of $1.1 billion for the year were down 0.7% with same store sales off 3%