House of Fraser has reported that like-for-like sales fell 1.5 per cent over the Christmas period and has reassured on its financial position after paying back its bank loans ahead of schedule.

The department store chain, which is backed by a Baugur-led consortium, said that total sales grew 4.5 per cent in the five weeks to January 3, with like-for-likes down 1.5 per cent.

Gross profit was up on the same period last year, but the retailer said that marketing activity was “more aggressive in response to tougher high street conditions”.

Inventories were reduced by 10 per cent year-on-year and terminal stocks are “significantly” down on the year, it added.

The retailer said that it had repaid a banking facility ahead of schedule and was compliant with the conditions of its banking agreements.

On January 2, it repaid£34.5 million, meaning that it has repaid or cancelled over£140 million of its facilities arranged at the time of its acquisition by Highland Acquisitions in November 2006.

The retailer said it expects to be in a “strong” position at the end of its financial year. It has cash deposits in excess of£85 million and available working capital facility of£100 million.

The facility was undrawn for most of the last year and is needed in the run-up to Christmas, when the retailer increases its stock, it said.

Last year, the maximum working capital requirement was£20 million. This year, capital expenditure has been reviewed and reduced.

Chairman Don McCarthy said: “There is no doubt that the retail sector has experienced one of its toughest years to date. However, our performance over the Christmas period was positive and we are satisfied with the robustness of our business."

He added: “The outlook for 2009 remains challenging and we will continue to focus on managing our business accordingly so that our positive performance can continue throughout the new year.

"However, we do anticipate changes to our brand portfolio, as underperforming brands will leave our business and brands that are performing well will grow alongside new brands introduced during the year.”