The company said losses for the six months to early August came in at �34.9m ($55.8m), down by 12% on the same period last year, and in line with City forecasts.

Overall sales were up by 1.7% on the year at about �1bn, lifted by a stronger performance at its flagship high street stores.

The firm also highlighted an improving sales trend, with revenues in its stores climbing 2.5% in the second quarter compared with a 0.4% decline one year earlier.

Woolworths chief executive Trevor Bish-Jones attributed the improved result to "better buying and cost control," and said the firm was looking forward to the all-important Christmas season with "confidence."

The company, which specialises in confectionery, CDs, and household goods, is taking on 6,500 extra staff and installing 1,000 new tills in anticipation of bumper Christmas sales.

The figures will stir hopes that the retailer, which lost ground to High Street rivals during the 1990s, is on the road to recovery.

There was no word on recent market speculation that the company may be targeted for a takeover by retail entrepreneur and BHS owner Philip Green.