Discount retailer Peacock sought to allay investors' fears over poor sales by indicating it would meet profit expectations this year.

The group said cost cuts and the benefits of its acquisition in July of Bon Marche would help to offset challenging trading conditions.

Talks with Woolworths over alterations to a key supply deal would bring mutually beneficial changes to the contract.

Peacock's market value has halved in the last four months on fears over its performance but its shares climbed six per cent.

Chief executive Rich-ard Kirk said: "We have a good business which has been strengthened by the acquisition of Bon Marche. I view the future with confidence."

Peacock operates 351 stores, including Brigh-ton, Newhaven, Bognor, Burgess Hill and Portslade. It said total sales had improved by five per cent since the start of April, reflecting the addition of 12 new stores.

The fall in like-for-like sales had been cut to 3.9 per cent from the 4.4 per cent drop reported in July for the 13 weeks to June 30.

Analysts are forecasting pre-tax profits of £24 million before one-off costs for the year.

Finance director Keith Bryant said the group was comfortable with the target and hoped the statement would convince the City.

Woolworths stocks the group's clothes in 15 of its larger out-of-town Big W stores under a supply deal that lasts until March 2005.

Mr Bryant said the talks were aimed at removing constraints from the deal to allow Peacock to supply more Big W outlets.

He dismissed concerns Woolworths was looking to beat the group down on price, saying: "It knows we have to make money or we are not going to do it."