Dixons Retail , Europe's No. 2 electrical goods retailer, said sales declines accelerated over the key Christmas period, though the firm maintained gross margins and claimed it outperformed competitors in Britain.

Dixons, home to the Currys and PC World chains in Britain, said group sales at stores open over a year fell 5 percent in the 12 weeks to January 7.

That compares to analyst forecasts of a fall of 4-6 percent and a decrease of 3 percent in the second quarter.

Dixons, which also runs Elkjop in Nordic countries, UniEuro in Italy and Kotsovolos in Greece, said gross margins across the group were flat year on year.

The firm said the sale period after Christmas was distorted by the UK's VAT sales tax rise last year.

Like-for-like sales in the two weeks to January 14 were up 2 percent and up 23 percent in the period from January 4 to January 14.

Consumer confidence in many of our markets remains fragile and we will maintain a cautious approach to the outlook for the year ahead, said Chief Executive John Browett.

European shoppers have been curbing spending as their disposable incomes are squeezed by rising prices, muted wages growth, government austerity measures and fears over the impact of the euro zone debt crisis.

Electrical goods chains such as Dixons and European No.1 MediaMarkt Saturn are facing extra pressure from cut-price competition from internet retailers and supermarkets.

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

Shares in Dixons, which have lost 55 percent of their value over the last year, closed Monday at 9.7 pence, valuing the business at 350 million pounds.

(Reporting by James Davey; editing by Kate Holton)