Sales at WH Smith tumbled over Christmas but the City was unperturbed because of a sharp improvement in profit margins.
Like-for-like sales in the seven weeks to 20 January fell by 8 per cent at the company's 540-strong chain of high street shops, and 9 per cent in the 20 weeks to that date. But profit margins improved by a better-than-expected 3 per cent and the shares finished strongly ahead, up 21p at 395p.
The company said this was down to the decision to reshape its business, cutting the floor space allocated to "entertainment products" such as CDs and DVDs, where sales have been badly hit by competition from online retailers and downloads.
The retailer is instead focusing on books, stationery, magazines and newspapers, which offer better margins.
WH Smith also said it had unearthed lower-cost sources for its offerings, and improved "markdown management" - the way it deals with the sell-off of surplus stock.
Its chief executive Kate Swann said: "We increased the pace at which we are rebalancing the mix of our business towards our core categories. Looking ahead, we remain cautious about consumer spending in our markets and our plans reflect this."
Her turnaround plan has seen costs axed by £42m in two financial years, with supplier terms improved and head office jobs cut. Entertainment goods are due to fall to less than 10 per cent of revenues, compared with 25 per cent when she arrived.
The company was also buoyed by the continuing strength of its travel division, where sales grew 4 per cent. Overall group like-for-like sales - which excludes new store openings and closures - were down 6 per cent, in line with analysts' forecasts.
This month the company joined the growing list of British companies that have closed final-salary pension schemes.
Analysts were encouraged by the figures,although there remain concerns about the group's long-term ability to thrive.
The Seymour Pierce analyst Richard Ratner said the trading statement was "overall much as expected". He added: "Kate Swann has done a great job but at some stage she has to get top line moving. Equally, the current performance is a massive indictment on the mismanagement of WH Smith's retail arm for the last decade or longer."