HMV is relying on a strong Christmas as the consumer crunch has started to hit its High Street entertainment and Waterstone's book stores.

Sales at the HMV outlets, which on a same-store basis rose 11.4% in the last financial year, are just 4.3% ahead in the first 18 weeks of this year.

At Waterstone's the slowdown has become a reversal, with last year's 3.3% growth becoming a 1.7% fall once numbers are adjusted to exclude the phenomenal effect of the final book in the JK Rowling series, Harry Potter and the Deathly Hallows.

On that basis, group sales are up 2.2% against 7.3%.

"This is undoubtedly a much tougher consumer environment," said chief executive Simon Fox who was brought in to HMV from running Kesa Electricals' Comet business two years ago.

"But this is a solid start and we are trading where we expected to be. We never expected to match last year's phenomenal double-digit growth at HMV but think we can carry on with low single-digit like-for-like sales growth, which would be pretty respectable compared to much of the High Street," he said.

The first 18 weeks of the year account for just 25% of the group's revenues while November and December make up 40%.

Fox is pretty optimistic about the line-ups of new releases in all the main categories of DVDs, music, games and books in the run up to Christmas.

He pointed out that the sales decline so far at Waterstone's came entirely from a lack of major non-fiction best sellers. Last year non-fiction books were £1 million-plus sellers (The Blair Years, The God Delusion, Gordon Ramsay and Bill Bryson's Thunderbolt Kid). This year there has been just one (another Gordon Ramsay).

At HMV, the gradual roll-out of the new look saw the biggest new store yet open in Liverpool yesterday.

Sales in the new-format stores, of which there are now a dozen with 10 more set to open by next Spring, are still running ahead of those in the old format.

Before the end of the calendar year, HMV will launch its loyalty card and make a major move into trading secondhand video games.

The games market is still the strongest area of growth, stimulated by the Nintendo Wii but supported by its rivals Sony Playstation and Microsoft X-Box.

Fox said that only Game and Gamestation, which recently merged, are major players in the so-called "pre-played" games market.

He hopes to gain an edge on them by offering not just to buy used games for cash but to offer a better price if punters accept vouchers, which can then be spent anywhere in the HMV store.

THE CHRISTMAS PICKS

Music
Oasis
Snow Patrol
Take That
Killers
Now 71

DVDs
Sex and The City
Mamma Mia
Batman
Dark Knight
Indiana Jones
Iron Man

Games
Fifa 09
Wii Fit
Gears of War II
Rock Band
Lego Batman

Books
Jamie's Ministry of Food
Stephen Fry's America
Tales of Beedle the Bard
Christopher Paolini: Brisingr
Nigella's Christmas