FASHION retailer Arcadia showed its turnaround strategy was paying off as it beat City expectations with a 59.5 per cent profits increase.

The Burtons-to-Dorothy Perkins group said sales were continuing to soar despite fears of a slowdown in High Street spending.

It has focused on key brands in a bid to revive its fortunes.

Warehouse, Principles, Racing Green and Hawkshead were sold to a management buy-out team in October and under-performing stores shut.

Sales and margins at the remaining brands, which also include Wallis, Miss Selfridge, Evans and Topshop/Topman, were on the up.

Like-for-like sales across the six, excluding new stores, rose 9.4 per cent in the six months to February 23, as group turnover rose four per cent to £1bn.

Pre-tax profits across the business rose to £57.9m before one-off costs, compared with £36.3m last time.

Finance director Nigel Hall said: "Arcadia is a very different business from the one we had 18 months to two years ago. We have focused the business on our key brands, we have fewer stores, and we believe we can deliver sustainable growth in the future."

He shrugged aside fears the group could be thrown off course by any lull in the consumer boom as interest rates begin to rise.

He said: "We have demonstrated Arcadia can outperform the market and does not depend on high levels of growth to grow its profits."

Like-for-like sales growth across the six key brands increased to 12.6 per cent in the seven weeks to April 13.

Arcadia aims to clear its debts by the end of the financial year. It cut them to £11m from £195m a year ago. Bottom-line pre-tax profits were £54.1m, compared with first-half losses of £57.4m last year.

Shareholders will receive an interim dividend of 3.5p per share. Last year, no dividend payment was paid.

"I'm not sure as far as the High Street is concerned the Budget will have that much effect on the consumer in the near term.

He added: "I think the expectations for the economy suggest that interest rates will rise in the not to distant future.

The group's turnover figure includes a contribution from the four, which generated profits of £4.6m in the half year.