Safeway, the UK's fourth largest retailer, has reported a sustained increase in sales.

The company said that sales for the six months to mid-October grew 5.7% to more than �5bn ($7bn).

The retailer has now completed an unbroken two-year run of rising sales, signalling that it has recovered well from its mid-1990s slump.

Pre-tax profits also rose, climbing by 8% on the previous six-month period to �180m.

That was slightly below the expectations of analysts, most of whom had forecast pre-tax profits of about �182m.

Recovery plan

Safeway, like its rival J Sainsbury, is mid-way through a store refurbishment programme designed to lure back customers who defected to low-cost competitors over the past two years.

Last year, the company scrapped a long-running loyalty card scheme in favour of aggressive price competition as part of a bid to reposition itself.

It is also introducing a new range of in-store services including pharmacies, dry cleaning and pizza ovens.

Investors have given Safeway's recovery programme their seal of approval, lifting the company's share price from a low of 150p in late 1999 to about 350p.

"Our strategy is on course and delivering significant performance improvement," said Safeway chairman David Webster.