House of Fraser is to open four new stores in 2004

The UK company said sales in the first seven weeks of the current year were lower than the same period last year.

But it said gross margins were ahead, helped by fewer discounts on its previous season's stock.

The firm reported pre-tax profits before exceptional items of �27m ($50m) to January; �18.6m after exceptionals including the disposal of stores.

The company, under persistent bid speculation following the takeover of rivals Selfridges and Debenhams, said it planned to open four new stores over the next two years, giving it 450,000 sq ft of new trading space.

"The results announced today, combined with the momentum generated by our opening programme, support our confidence in the group's prospects for the next year and beyond," chief executive John Coleman said in a statement.