Matalan has been cutting costs and jobs

Sales were down 5.5% in the 10 weeks to 7 January not counting new store openings - although this improved on a 10.6% fall in the previous nine weeks.

Clothing sales, its core business, rose 0.3% after falling 4.6% in the previous period, while market share held at 3%.

The company operates from more than 190 mostly out-of-town stores.

"In a tough trading environment we have maintained market share in our core clothing business, which represents 80% of sales," said chief executive John King.

This was despite Matalan's decision to cut the number of promotional items it had on sale in a bid to boost profitability.

However, home and Christmas gifts sales "performed poorly", he said, and the company was taking action to address the problem.

Owned by the family of founder and chairman John Hargreaves, Matalan has been frequently tipped as a bid target for supermarkets such as Asda and Tesco which are reported to be keen to expand into non-food retailing.