Virgin Megastores defied the gloom in the entertainment market over Christmas, pushing its underlying sales ahead by 4.6% in the four weeks to December 30 and increasing its market share.

Its performance bucked the trend in the market which prompted pre-Christmas profit warnings from rivals HMV and Woolworths. Virgin said the figures exclude online sales, which surged 191%.

Simon Douglas, the managing director, said there had been market share growth across all main formats. "Despite all the talk of high street doom and gloom, particularly around entertainment with its rampant price deflation, I am delighted with our trading performance," he said.

DVDs became the dominant format for Virgin Megastores, eclipsing music for the first time in its trading history. Underlying sales growth in DVDs was 24.1%, with its market share rising by 0.7%.

Mr Douglas said: "The positive performance of DVD over the Christmas period was generated through a strong release schedule, phenomenal success of box sets and by working closely with the key studios to fully exploit their catalogues.

"Music sales were down overall on last year mainly due to price deflation and a bland release schedule. The majority of label marketing campaigns being heavily weighted to 'Best Ofs' rather than a wealth of studio albums released during the year was a missed opportunity in our view.

"Despite market conditions, Virgin was able to increase market share by 0.9%, selling more units than in 2005."

The chain also reported strong growth in game sales, which jumped by more than 19% in December despite the delayed launch of the PlayStation 3 and shortage of supplies of Nintendo's Wii console and its handheld DS games console.

Mr Douglas said he had reason to remain optimistic despite anticipating a tough year ahead because of competition from supermarkets and internet retailers.

He said: "Our prices remain competitive, we will continue to run great consumer offers, have invested significantly in improving the shopping environment, most notably with our new Manchester store, and we have new stores in the pipeline, including Camberley, Exeter and Arklow in Ireland."