Game Group falls on fear demand has peaked

By Mark Potter

LONDON (Reuters) - Computer games retailer Game Group (GMG.L) smashed first-half profit forecasts, boosted by new releases like Grand Theft Auto IV and Wii Fit, but its shares fell on concern that demand has peaked.

Game shares, which have outperformed the general retailers index .FTASX5370 by about 85 percent this year, fell as much as 7.5 percent in early Thursday trading.

"Game's share price has fallen sharply on two previous occasions as the cycle has passed its peak, and we continue to believe this could be repeated," Landsbanki analyst Mark Photiades said in a research note.

Game, which sells games, consoles and accessories from more than 1,200 shops in Britain and overseas, said profit before tax and one-off items would be at least 33 million pounds in the six months to July 31, beating analysts' forecasts of between about 15 million and 25 million pounds.

Sales at shops open at least a year were up 24.8 percent in the 22 weeks to June 28, boosted by what Chief Executive Lisa Morgan called an "unprecedented number of triple A software launches -- all in a period that would normally be a quiet time in our industry."

These releases included Mario Kart and Metal Gear Solid 4.

Morgan said the games market was "absolutely not" at a peak and brushed off suggestions that, with no new console releases due in the near future, the market would lose momentum.

"The point to make is that we haven't seen any new console releases in the first half and we were up against the launch of Playstation 3 last year," she told reporters.