Entertainment and books retailer HMV shrugged off suggestions yesterday that consumer spending is slowing and reported better than expected full-year profits. The group said trading at its Waterstone's chain of bookshops has been given a boost by the release of the new Harry Potter book.

Like-for-like sales in the book stores over the first eight weeks of the new financial year were ahead 7.2%, with 3.4% of that down to Harry Potter and the Order of the Phoenix - even though it was available for just one day of the trading period. On that single day the chain sold 100,000 copies of the book - one in 10 of the release-day sales.

Underlying UK sales of music, videos and DVDs at HMV - which account for 75% of group operating profits - were up 1.6% over the same period, although the overseas stores had a tougher time as world music sales have declined.

The results - the store chain's first since flotation last May - showed a 20% improvement in profit to
£96.5m. The shares added 7.25p to close at 141p, still well short of the 192p float price but 37% ahead of its low.

Chief executive Alan Giles said he detected a more upbeat trading environment: "It seems to us that UK consumer confidence is improving."

The main driver for HMV is DVDs, which are more lucrative to the retailer than music CDs. Total sales were ahead 83% last year. Mr Giles conceded some buyers were merely switching from video to DVD but video sales were also up 32.4%.

HMV now has a market-leading 25.8% share of the DVD market, which the company says is "an outstanding feat given HMV was not the market leader in VHS".