TOP Shop-to-Dorothy Perkins group Arcadia, which is being pursued by Icelandic retailer Baugur, said talks were continuing as it reported a jump in sales in the run-up to Christmas.

Like-for-like sales at its shops, which also include Burton and Miss Selfridge, rose 9.4 per cent for the 19 weeks to January 5.

Stuart Rose, chief executive, said: "The group's performance over the first 19 weeks of the year, and especially over the Christmas trading period, reflects the improvements that have been made in the business over the past year.

"We have made significant progress in developing our product offer and brand marketing, improving the efficiency of our supply chain and reducing group debt.

"The results for the first four months of the year are encouraging. However, the outcome for the financial year to August 2002 will depend upon the strength of consumer demand for the remainder of our year."

Arcadia has seen speculation in the run-up to the update that Baugur was waiting for the trading statement before deciding whether to proceed with its bid.

The Icelandic firm, which is an Arcadia franchisee, made its approach in October, which valued the firm at between 280p and 300p a share, or up to £568m.