Department store chain House of Fraser produced better-than-expected Christmas figures before predicting that 2006 would be a difficult year.
Total sales were up 34.2 per cent in the six weeks to January 7, ahead 7.7 per cent on a like-for-like basis, after strong sales growth in key areas such as accessories and menswear.
It also benefited from the takeover of Jenners and Beat-ties stores and the opening of outlets in Norwich, Maidstone and Dublin.
The company said no decision had been taken on the future of the Beatties store site in Corporation Street, Birmingham, which is due to close down tomorrow.
Chief executive John Coleman said: "Whilst the retail environment has clearly been very challenging, we are pleased with the group's performance in the vital Christmas period."
He expected trading conditions to "continue to be difficult" during the first half of the year as consumers remained cautious about levels of debt.
Analysts at Seymour Pierce had been expecting a 5.5 per cent like-for-like decline across the second half, having downgraded numbers in December from a 3.5 per cent forecasted drop. The group's house broker Dresdner Kleinwort Wasster-stein had pencilled in a four per cent decline.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers: "Management's cautious outlook comments may simply be a touch of realism given what could prove a very tough spring period for the retail sector as consumers now start to receive their credit card bills."
Analyst Matthew McEachran from Investec Securities said the firm had proved itself with an "excellent Christmas" and successful stock management.