Woolworths is to open a new branch inside a Norfolk supermarket in a sign the troubled retailer is looking beyond its traditional high street stores to compete with the likes of Tesco and Asda.

The company has announced that it will open a 3,000sq ft “store-within-a-store” at Somerfield in Catton, Norwich, next month selling toys, household goods and children's clothes.

The new branch will be the fourth link-up between Woolworths and Somerfield around the country and follows the opening of shared facilities in Surrey, Sheffield and Stoke.

Woolworths programme manager Andy Hayzelden said the move would create six new jobs, adding: “The response from the first three stores was hugely exciting for both Woolworths and Somerfield.

“The two retailers complement each other and combining the brand's offers much more choice and value for our customers.”

The announcement came as Woolworths revealed that the former boss of Focus DIY is to become the company's new chief executive.

Steve Johnson, 44, was credited with leading a turnaround of Focus DIY and will earn a basic salary of £550,000 a year in the top job at Woolworths.

But it also comes just days after East Anglian property developer Ardeshir Naghshineh increased his stake in Woolworths to more than 10pc.

The EDP has reported in recent weeks how Mr Naghshineh has been gradually building his shareholding in the company amid speculation in the City that he may lead a consortium into a takeover bid for the company.

The company is one of the oldest on the British high street, but its fortunes in recent years have come under challenge from supermarkets and internet retailers.

At the end of last month, Woolworths revealed that like-for-like sales fell by 6.7pc in the six weeks to July 26, with margins under pressure because a greater proportion of trade came from CDs and DVDs, rather than higher margin outdoor products and clothing.

The company is also working on a strategic review after consultants advised the board that there was potential to build a sustainable business based on its small and medium-sized stores. There are about 800 sites in the company's property portfolio. But Woolworths also operates a successful entertainment wholesale and publishing operation, Entertainment UK, which supplies books, CDs and DVDs to supermarkets and which includes the book wholesaler Bertram Group.