Dixons , Europe's No.2 electrical goods retailer, posted a wider first-half loss as cash-strapped shoppers cut back on purchases of discretionary goods, but said it was taking market share from rivals faring even worse.

The group, home to the Currys and PC World chains in Britain, said on Thursday it made a loss before tax and one-off items of 25.3 million pounds in the 24 weeks to October 15.

That compared with a loss of 6.9 million pounds the same time last year, but was ahead of analysts' average forecast for a loss of about 30 million pounds.

Sales at stores open over a year fell 3 percent in the second quarter, improving on a 7 percent drop in the first, while net debt fell over 70 million pounds to 143 million.

Shoppers across Europe are reducing spending on discretionary items such as televisions and music systems as their disposable incomes are squeezed by rising prices, muted wages growth and government austerity measures, and they worry the euro zone debt crisis could tip the region back into recession.

Electrical goods chains such as Dixons and European No.1 MediaMarkt Saturn also face cut-throat competition from internet retailers and supermarkets.

U.S. group Best Buy abandoned plans earlier this month for a chain of European megastores, while Kesa Electricals effectively paid a bidder to take loss-making British chain Comet off its hands.

In what remains a challenging environment, the pace and impact of improvements in our operating model is driving outperformance versus our competitors and market share gains, said Dixons chief executive John Browett.

Dixons, which also runs UniEuro in Italy, Kotsovolos in Greece and Elkjop in Nordic countries, has outperformed rivals in part thanks to a store revamp programme focussed on more popular megastores. It has also slashed costs.

Nonetheless, its shares slumped to a three-year low of 9.245 pence on Wednesday, hit by concerns that deteriorating trading conditions could undermine its financial position.

(Reporting by Mark Potter; Editing by Will Waterman)