Miss Selfridge will return to profit this year after turning around a loss of £3.5 million last year.
The young fashion chain has clawed back sales under creative director Yasmin Yusuf, who joined last year, and has injected more fashionable product into its ranges.
Like-for-like sales in August are understood to be up by about 25%, and owner Sir Philip Green is expected to acknowledge the turnaround when he unveils Arcadia Group's figures in October.
Arcadia chief operating officer Ian Grabiner would not comment on profits, but confirmed that improved performance had been driven by bottom-line sales rather than cost-cutting at head office.
He said: "The fact is that we have invested more. Miss Selfridge has performed exceptionally well and it is based on product."
Seymour Pierce analyst Richard Ratner added: "Miss Selfridge did go off the boil, but now it has its handwriting back. Product is much better."
- Miss Selfridge sent suppliers a document about its ethical trading practices last week, calling on them to appoint ethical compliance managers and to audit all factories.