Entertainment group Zavvi revealed like-for-likes sales rose 10 per cent in its first year since being bought out from Virgin. Despite posting a loss, it said it has managed to improve EBITDA “significantly”.

Although Zavvi would not reveal the loss it had made in the period, chief executive Simon Douglas said it had managed to “eat into the losses by more than£10 million”.

DVDs were Zavvi’s number one category and sales of the product have increased 2 per cent in the past 12 months. Blu-ray sales rocketed 300 per cent.

Sales of games were strong and now account for 30 per cent of Zavvi’s turnover, making them the second biggest product category.

However, music sales slid 18 per cent as consumers opted for downloads instead of CDs. At an annual conference in two weeks time, Douglas is expected to announce to staff that the retailer will begin selling music in digital format on its web site.

Zavvi’s online like-for-like sales soared 148 per cent and there was growth across all categories. An enhanced iPod offer will be rolled out in time for the peak fourth quarter trading period.

Zavvi, which plans to open between 5 and 10 stores a year over the next three years, said t-shirts and books contributed to a 47 per cent increase in sales across the group. These ranges will be expanded further.

Douglas said he was “delighted” with the results. “When we took over we didn’t know what the consumer reaction would be to us,” he said. “We have achieved a lot and have come along way as both a business and a brand, but we are not complacent as there is still a lot to do to build on.”

In September last year, Virgin Megastores was bought out by management, who then converted 112 UK stores to the new Zavvi fascia in two weeks.

Virgin Megastores made an operating loss of£47 million in its last year of ownership by Virgin. According to accounts filed at Companies House, Virgin Retail made a “continuing operating loss” of£46.9 million for the year to March 31, 2007.