UK retailer Game sees sales growth slow

British video games retailer Game Group Plc has continued to buck the high street gloom with a rise in underlying sales, but its rate of sales growth has slowed, the company reported.

"To date our customers' spending patterns have remained relatively resilient, considering the challenges in the wider economy," the 1,340-store group said in a trading statement.

"The board remains confident of a successful outcome for the year."

Game said that over the 18 weeks to November 29, group sales on a like-for-like basis, which strips out the impact of new space, increased 1.5 per cent.

This compares with growth of 4.9 per cent for the eight weeks to September 20.

Analysts said the slowdown reflected falling numbers of shoppers on the high street, stiff competition and very tough comparative numbers. Last year, sales in the latter 10 weeks were boosted by the launch of the highly successful Halo 3 game.

However, some brokers were alarmed. "In all likelihood we think that like-for-like sales are currently neutral at best and as a result think the video gaming market has peaked," said analysts at Altium Securities in a note to clients.

They downgraded their recommendation from "hold" to "sell" and cut their price target from 140 pence to 130.

Game's like-for-like sales in its UK and Ireland business increased 1.8 per cent over the 18 weeks. They were up 0.7 per cent in its international business.

Game said total group sales for the 18 weeks were up 9.3 per cent, reflecting the popularity of hardware formats such as PlayStation3 and Xbox 360 and games such as Wii Fit and Mario Kart as well as the addition of 183 stores during the period.

Many British retailers are struggling with intense competition and a downturn in consumer spending, amid sliding house prices and rising unemployment and fears the country has already entered recession.

Last Tuesday Tesco Plc, Britain's top retailer, posted its weakest UK sales growth since the early 1990s.

But Game has bucked the trend, benefiting from a growing base of console owners and a strong software release schedule. Gaming is also seen as a more affordable alternative to many other family leisure activities.

For the 44 weeks to November 29, Game's like-for-like group sales were up 11.2 per cent, with total sales up 27.4 per cent.

The company maintained its previous forecast of like-for-like sales growth of eight per cent to 12 per cent in the year to end-January 2009, with gross margin growth of 0.8 to 1.1 percentage points.

Prior to last Tuesday's update analysts were on average forecasting a full-year pretax profit of GBP119m, up from GBP75.5m last time.

Brokers are more cautious about the following year. Analysts at Dresdner Kleinwort expect year to end-January 2010 pre-tax profit to fall to GBP110.5m, with the market seeing more aggressive hardware pricing.


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