DSG hopes the changes to its High Street stores will save �3m a year

Like-for-like sales at its Currys stores, which include rebranded Dixons outlets, rose 8% in the 16 weeks to 19 August against a 3% drop last year.

Overall like-for-like sales - which strip out the effect of new stores - rose 5% after falling 1% in 2005.

Strong demand for flat screen TVs and laptops had helped drive sales across Europe, the group added.

It also said a recovery in demand in the UK for white goods, such as washing machines and freezers, had also lifted sales.

'Good start'

"Overall the Group has performed well in most of our markets during the first 16 weeks of this financial year," said chief executive John Clare.

"I am encouraged by the good start to this financial year and believe that this year's pipeline of digital products will continue to capture the imagination of our customers."

In April, DSG announced it was shaking up its business in the UK in an effort to cut costs.

Under the plans, Dixons became an online retail operation with its 190 outlets rebranded as Currys.digital along with branches of Currys. The move, which is thought to have cost �7m, is expected to save DSG �3m a year.

Dixon's internet sales have racked up growth of 50% each year during the last four years, and it now gets over 1 million visitors per month.

But looking ahead, Mr Clare said it was too early to draw any firm conclusions for the year ahead as the first quarter of the financial year was a traditionally quiet time for the group.

DSG operates 1,450 stores in 14 countries including the UK, Norway, Sweden, Greece, Italy, Spain, France, Czech Republic, Poland and Finland.