Game sees tough year ahead

By James Davey

LONDON (Reuters) - Video games retailer Game Group (GMG.L) warned of a tough year ahead due to the UK retail downturn, offsetting a strong performance over Christmas and sending its shares up to 12 percent lower.

Game, which trades from more than 1,340 stores, concessions and franchises in nine European countries and Australia, said it expected to be hit by the deterioration in economic conditions despite recent strong sales of titles such as Call of Duty: World at War and FIFA 09.

"Revenue growth for the group will be challenging and there will continue to be inflationary pressures on costs," it said.

Game was consequently planning a slower expansion.

David Thomas, deputy CEO and group finance director, told reporters the retailer was targeting about 70 new stores in the year to end-January 2010, down from about 200 in the current year.

Altium Securities analyst David O'Brien reiterated his "sell" stance on the stock forecast a fall in year to end-January 2010 underlying pretax profit to 88.6 million pounds.

"Our belief is that the main feature of FY 2010 and beyond will be discounting of software and as a result falling gross margins," he said in a research note.

By 10:40 a.m. British time, shares in Game were down 9.25 pence, or 6.3 percent, at 137.75 pence, valuing the business at 477 million pounds.