House of Fraser has more than 60 stores in the UK

It saw a 2.4% fall in like-for-like sales in the first part of the year, in keeping with many firms affected by sluggish retail activity in early 2006.

House of Fraser said last week that it was in talks with Baugur, although it added there was no guarantee of a deal.

The two sides are discussing a possible �349m for the UK retailer.

Cost pressures

In a trading update, House of Fraser reported a 8.8% rise in total sales for the 19-week period to June 10.

However, a drop-off in promotions led to a fall in like-for-like sales, which exclude sales from outlets open for less than a year.

House of Fraser's shares closed unchanged at 135p, recovering from earlier losses suffered in the wake of the sales news.

"In March we said that we anticipated that the trading environment would remain difficult for the first half of 2006 and that we expected to experience further cost pressures," said chief executive John Coleman.

"This remains our view."

House of Fraser said the integration of Jenners and Beatties following their acquisitions last year was ahead of schedule.

The two store groups are to be relaunched in September.