The company said that the re-introduction of promotional offers, such as "buy-one-get-one-free" deals, have helped sales at the company.

Underlying sales for the five weeks to 3 January were down 2.1% on a year ago, but this was an improvement on the 3.6% decline in the 13 weeks to 27 December.

In the June to September quarter, the chain saw a 7.7% drop.

"This quarter has seen a significant change in Iceland sales performance," said chief executive Bill Grimsey.

"We are pleased with the margins being achieved and the momentum across the business as profitability continues to improve."

The company said sales had risen strongly at its refurbished Iceland stores and that it would now roll out the new format to 100 stores a year.

Tobacco sales suffer

Sales at the group's Booker wholesale business also fell, mainly due to declining tobacco sales.

The company said the reason for the drop in sales was "evidence of increased consumption of non-UK duty paid tobacco following the change in import controls".

Overall sales at the Big Food Group declined 2.8% for the five weeks to 3 January and 2.9% for the 13 weeks to 27 December.

On the London stock market, Big Food Group shares closed up 1.5 pence at 55.5p.