GAME warns of slow pre-Christmas sales

Leading UK videogame retail chain GAME Group has issued a trading statement today warning that demand for software on older platforms is failing to meet expectations, with low supplies of PSP and Xbox 360 unlikely to cover the shortfall.

In an update issued to the London Stock Exchange, the group reports that there has been no recent improvement in the retail trading environment, with the hoped-for boost in sales of current generation consoles and software failing to materialise.

As a result of this, GAME is seeing falling like for like sales in its UK stores - and while it admits that the impact on profits is difficult to estimate at this point, a major drop in profit for the full year is expected.

Today's statement projects full-year pre-tax profit at around GBP 3 to GBP 13 million, compared with last year's figure of GBP 31.9 million, with gross margins expected to be down a massive 300 basis points year on year.

One positive note in today's statement is that demand for both the PlayStation Portable and the Xbox 360 is proving to be high - but supplies of the PSP are described as "behind plan and intermittent", while hardware supplies of the Xbox 360 are expected to be "extremely limited", and neither platform will compensate for slow sales on the current-gen systems.

Other retailers have also reported that the Nintendo DS is selling out as fast as Nintendo can resupply the hardware, which may at least provide a positive Christmas for one of the new consoles.

"This is a difficult year for our industry," commented GAME chairman Peter Lewis. "We are seeing weaker than expected sales of mature formats, and whilst there is significant demand for exciting new products such as PSP and Xbox 360, there is a shortage of supply."

"All of this is happening in a tough retail environment," he continued. "However, the board reiterates its confidence in a successful outcome for the financial year 2006/2007, with ongoing high demand for next-generation hardware and software met by improved supply with the additional benefit of a return to premium prices."

GAME also noted in the statement that it expects both the PlayStation 3 and Nintendo Revolution consoles to arrive on retail shelves in Europe in the second half of 2006.