Computer games retailer Games Group spooked punters yesterday after warning that supply problems with the new generation of consoles from Sony and Microsoft would hit profits in the year to January.

The group, which derives around a third of its annual sales in the ten- week run- up to Christmas, said that while demand for the Sony PSP had been " exceptional" - around 430,000 units have been sold in the UK so far - supplies of the console had been behind plan and "intermittent".

There have also been problems with the supply of the powerful new Microsoft Xbox 360 - which launches in the UK on Friday - and Game yesterday admitted that there would not be enough stock in the shops to meet demand.

"We're putting pressure on both Sony and Microsoft to step up supplies of their units, but unfortunately it won't be enough to save Christmas this time round," said Game chief executive Martin Long.

City analysts had already revised down their profit forecasts for the company as the trading environment on the high street has become progressively difficult over the past few months.

But yesterday, stockbrokers Seymour Pierce, which three weeks ago trimmed its 2005-06 estimate from £ 25 million to £ 21.5 million, further revised its estimate down to just £6 million.

"Once again, this company has failed to deliver," said Seymour Pierce retail analyst Richard Ratner. "The company says that next year will see a 'successful outcome'... but we've heard this one before."

Three years ago, Game, which has a number of outlets in the West Midlands, suffered a similar fate after it got caught up in a pre-Christmas price war for the then new Playstation2. This year the group has been hit by the "significant price deflation" of older consoles and software and the absence of hardware launches.

"The current retailing environment is difficult. Consumers are being much more choosy on how they spend every pound in their pocket," said Mr Long.

However, looking ahead to 2006-07 Game said it expected "a rapid growth" in ownership of both Sony PSP and Microsoft Xbox360 consoles, while the launch of the new Sony Playstation3 and Nintendo Revolution in the second half of the year should boost revenues.