Woolworths is facing tough trading conditions

Baugur bought an extra 15 million Woolworths shares late on Friday, lifting its total stake in the company from just under 9% to 10.02%.

The share purchase comes just days before Woolworths reveals details of its performance over the past year.

In January, the firm blamed "difficult" retail conditions for falling sales.

'Challenging conditions'

Over the crucial festive season, like-for-like sales - excluding new stores open less than a year - fell 0.8% at Woolworths' core High Street outlets.

At the time, Woolworths said the outlook for 2006 was "challenging" due to weak consumer demand and the rising costs of rent and energy.

Baugur has been steadily building up its stake in Woolworths this year.

Baugur is one of the largest foreign investors in the UK High Street, owning a range of businesses including supermarket chain Iceland, fashion stores Karen Millen and Oasis and toy store Hamley's.

Analysts believe Baugur may be about to launch a fresh acquisition spree in the UK after its chief executive and other directors were cleared last September of corruption charges brought in Iceland.

Baugur's boss Jon Asgeir Johannesson admitted that the firm had had to put large acquisitions on hold while he and others fought the charges.

Woolworths is expected to say it made an annual profit of between �50m and �60m in 2005 when it updates the City on Wednesday.

Although sales of toys and computer games have been strong, Woolworths has had to contend with more consumers buying goods online rather than on the High Street.