Computer games retailer Game Group (GMG) has smashed first-half profit forecasts, boosted by new releases Grand Theft Auto IV and Wii Fit, but its shares slumped on concern that demand had peaked.
Game shares, which had outperformed the UK general retailers index by about 85 per cent this year, fell as much as 14 per cent to a three month low of 225p.
Shore Capital analyst John Stevenson, raised his full-year profit forecast by almost a quarter to £139.5 million.
“Unless we see new hardware launches into the UK market over the next two years, which appears unlikely at present, then we believe profits will peak this year and fall consistently over the following three years.’’ he said, keeping a “sell” rating on the stock.
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 in the six months to 31 July, beating analysts’ forecasts of between about £15 million and £25 million.
Sales at shops open at least a year were up 24.8 per cent in the 22 weeks to 28 June, 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 but Ms Morgan said the games market was “absolutely not” at a peak.
“The point to make is that we have not seen any new console releases in the first-half and we were up against the launch of Playstation 3 last year.’’ she said.
Ms Morgan said that, unlike previous games cycles which had been driven mainly by one major console - Sony’s Playstation - demand was now fuelled by a number of consoles, including Nintendo’s Wii and Microsoft’s XBox, and that new games were appealing to bigger audiences.
“What you are seeing now is that as the installed base of consoles grows there is a fantastic momentum for a whole host of software titles.’’ she said, tipping sequels for Fifa and Need for Speed games as big sellers in the run up to Christmas.
Pali International analyst Nick Bubb agreed the current games cycle was different from previous cycles.
“Given the much broader and deeper range of formats and consumers involved the games market boom is likely to continue.’’ he wrote in a research note.