* H1 pretax loss 7.9 million sterling, vs forecast loss 8-15 million sterling
* Sales flat at 3.35 bln sterling, like-for-like sales up 1 percent
* Underlying gross margin up 0.3 percent
* Says cautious on outlook, performing ahead of market
* Shares down 0.6 percent
(Adds CBI survey, John Lewis, Tesco links, updates shares)
By James Davey
LONDON, Nov 25 (Reuters) - Dixons Retail, Europe's No.2 electricals retailer, hopes Christmas demand for iPads, motion-sensitive gaming systems and 3D TVs will offset the impact of government austerity measures.
"It is clear to us that new technology sales will be strong" (at Christmas), Chief Executive John Browett told reporters on Thursday, after the firm posted an expected narrowing of first-half losses and said its recovery strategy was on track.
"However, the key question is how much of that substitutes for other expenditure in this kind of environment? We are not expecting an easy Christmas, we think it is going to be very competitive," he said.
Browett noted a "tremendous technology pipeline at present," also highlighting as expected top sellers a new range of iPods, LED TVs and bridge cameras.
All these products are being backed by the company's new brand advertising campaign featuring Star Wars robots R2-D2 and C-3PO.
Many of Europe's retailers are still struggling with consumers reluctant to spend on big ticket items as governments cut spending and raise taxes to reduce huge deficits.
MAINTAINED MOMENTUM
"We remain cautious on the economic outlook across many of our markets, as consumer confidence remains low. However, we have maintained our momentum in transforming the group and are performing ahead of the market," said Browett.
Separately on Thursday a survey showed British retail sales growth accelerated in November and said retailers expected demand to hold firm in the festive season. Also John Lewis said department store sales rose over 12 percent in the four days to Nov. 24, and Tesco, the UK's biggest retailer, forecast its best ever Christmas.
Dixons, which makes all its profit in the second-half, is two and a half years into a turnaround plan focused on selling underperforming businesses, cutting costs, revamping stores, opening larger stores, and improving product ranges and service.
The programme has generally been well received by analysts, but Dixons's share price has fallen by a third over the last year, underperforming a 6 percent fall in the UK general retailers index.
Investors are concerned about macro headwinds, competition from supermarkets and pure play Internet retailers, and the arrival in Britain of U.S. electricals No.1 Best Buy.
The stock was down 0.6 percent at 26.5 pence at 1150 GMT, valuing the business at about 903 million pounds.
(Dixons's) "rate of like-for-like sales growth slowed from 3 percent at the Q1 stage to 1 percent for H1, fuelling the debate on the likely winner of the important cycle race -- economic vs technology," said Investec analyst David Jeary.
Dixons made an underlying pretax loss of 7.9 million pounds ($12.45 million) in the 24 weeks to Oct. 16.
That compared with analyst forecasts of a loss of 8-15 million pounds, according to a Reuters poll, and a loss of 17.6 million in the same period last year.
Total sales were flat at 3.35 billion pounds, with 16 percent of this made over the Internet, with market share won in the UK, Nordics and Greece. Gross margin was up 0.3 percent.
Best Buy, through its joint venture with Carphone Warehouse , has opened six electrical goods megastores in Britain and has said it could build a chain of up to 100 shops to challenge Dixons and Comet owner Kesa Electricals (Editing by Jon Loades-Carter) ($1 = 0.6345 pound)