U.K. entertainment retail chain Zavvi has reported a 10.8% increase in sales on the previous year, when it was trading as Virgin Megastores.

However, music sales were down 11.6% compared to the same period in the previous year. The company blames this on a "weak release schedule" and "price deflation" of chart albums. But the company says it did experience growth in catalog sales in the fourth quarter and remains confident about scheduled 2008 releases from Oasis, Madonna, Coldplay, U2 and Razorlight.

As previously reported, Virgin Megastores U.K. was rebranded as Zavvi last September following a management buyout. The rebranding of the 125 stores was part of the deal, with Virgin focusing on other areas including transport and telecoms.

The 10.8% increase over the four-week period ending Jan. 5 excludes online sales. The company says it also achieved a 70% boost in online sales and margin growth of 2%.

"When you consider the downbeat assessment of the [U.K.] high street from certain quarters, our trading performance over Christmas is very encouraging," said Zavvi managing director Simon Douglas in a statement.

"Although the team has a rich history in entertainment retail, there's no getting away from the fact that Zavvi is the newest kid on the block as far as customers are concerned, so to perform as well as we have during such an important trading period has to be taken as a huge positive."

Zavvi saw a marked increase in games sales, which went up by 62.7% over Christmas compared to the previous year. DVD sales grew by 6.4%, while other product (comprising books, clothing and digital hardware) increased by 45.2%.

There are plans to launch new Zavvi stores this year in Belfast, Camberley, Bristol and Liverpool, while the rebranding program will be complete with new window and in-store branding by the end of January. The company's Web site will be rebranded as Zavvi by Jan. 14.

"We remain upbeat about the potential of the music and DVD market and are fully committed to these core markets to further push our specialist credentials," added Douglas.

In the U.S., Virgin Megastores have separate new ownership but retain the use of the original logo.