Sales have warmed up for Matalan

Same-store sales rose by 4.6% in the second half of the financial year, bouncing back from a drop of 6.2% in the previous year.

Helping the sales revival was Matalan's decision to launch its spring and summer ranges earlier than usual.

The upbeat performance contrasts with gloomier news elsewhere in the sector.

"This year has been about returning the business to sustainable like-for-like growth, and we have delivered on that objective," said chief executive John King.

Price war looms

Matalan has stuck by its forecast for profits of �84m for the year to the end of February.

But analysts warn that this year may get tougher for the west Lancashire-based discount retailer as rivals Marks & Spencer and Next lower their clothing prices while Tesco and Asda expand their clothing ranges.

Last year, following problems with its jeans unit, Matalan was a rumoured takeover target for rivals ranging from Tesco to US giant Wal-Mart.

Matalan has already confirmed an approach for its Lee Coopers jeans unit and talks are still ongoing.