Game Group pinned down as new 'Call of Duty' fails to save the day

Retailer's shares slump as it reveals a 14% fall in sales with UK and Ireland badly hit

The video game Call Of Duty: Modern Warfare 2 stormed on to the shelves last month and sold a staggering 4.7 million copies in America and Britain in just one day. The extraordinary success of the shoot-'em-up may have been a boon for some retailers but it was not enough to avert disappointing results from Game Group, which saw its shares plunge by more than 20 per cent yesterday.

Year-on-year sales at the specialist computer games retailer fell by 13.9 per cent in the 18 weeks to 5 December, and figures for the UK and Ireland were particularly disappointing. It was worse than the market expected, and further fears were raised by Game's caution about Christmas trading. Its executives were quick to point out that it had outperformed the UK market, which fell 25 per cent over the period, but that was not enough to stop the company's share price from dropping 28.2p to 116.4p at the close of play.

David Stoddart, an analyst at Altium Securities, said: "The major title launches for this season have now passed and like-for-like sales are nevertheless worse than expected. Even allowing for some benefit to cost lines as a result of lower activity, further downgrades, potentially substantial, appear likely."

Game said it suffered from tough comparatives following a record year for console sales in 2008, the underperformance of some titles and lower margins following console price cuts. The chairman, Peter Lewis, said that while the release of the latest Call Of Duty, as well as football game Fifa 10, broke sales records, "the exceptionally strong performance of these titles was in part offset by softer than expected sales of some other releases".

Game's console business was the worst hit. Despite Sony slashing the price of its PlayStation 3 and Microsoft releasing a cheaper Xbox 360, the retailer said the moves had "not offset the overall fall in hardware revenues". Lisa Morgan, chief executive of Game, added: "We are still seeing good demand for the hardware but we predicted value growth would be tough given the price declines. There were also steeper declines than expected at Nintendo."

In October Nintendo said its profits had been halved by a fall in sales of its Wii console, with talk that the the mid-price market was becoming saturated; more than six million Wii systems have been sold in the UK.

Ms Morgan said Game would target sales of higher-margin software and accessories, hoping that its position as a specialist would help to bring buyers through its doors. She said that with the number of third-generation consoles owned in the UK increasing to 27.2 million from 20.4 million this time last year, software sales should soar again. While Game has benefited from the closure of high-street rivals Woolworth and Zavvi, there is fierce competition from online retailers and supermarkets which often sell heavily discounted games. Mark Photiades, an analyst at Singer, warned of the "longer-term structural threats posed by internet retailers and digital distribution".

But Game hit back, saying it had improved its market share this year with customer loyalty cards and offers to trade in old games, as its lucrative pre-owned games business grew strongly "particularly in the current economic climate".

The next eight weeks are crucial because the Christmas period has historically brought in a quarter of Game's annual turnover. It has launched its biggest-ever marketing campaign to ensure sales remain robust.

Many analysts believe the industry is facing a transition, especially with the move to online play. Screen Digest magazine predicts that online gaming's market share will rise from 18 per cent to 40 per cent by 2013. PricewaterhouseCoopers estimates the global video games market will grow from $51.4bn last year to $73.5bn in 2013.

Britain is the largest video games market in Europe and the third-largest in the world, generating $4.7bn last year. PwC said the UK was an "important game-developing centre" but it was feared that other countries, especially France and Canada, will "lure developers away with tax incentives".

The Independent Game Developers' Association (Tiga) has urged the Chancellor to introduce tax breaks in his pre-Budget report to help the UK games industry. It believes such a move is crucial to saving 3,550 jobs, safeguarding £457m in development spending and saving £415m in tax receipts to drive growth in UK studios.

Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Recruitment Genius: Experienced Financial Advisers and Paraplanners

Negotiable: Recruitment Genius: This extremely successful and well-established...

Guru Careers: FX Trader / Risk Manager

Competitive with monthly bonus: Guru Careers: We are seeking an experienced FX...

Guru Careers: Investment Writer / Stock Picker

Competitive (Freelance) : Guru Careers: An Investment Writer / Stock Picker is...

Day In a Page

How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map
Lionel, Patti, Burt and The Who rock Glasto

Lionel, Patti, Burt and The Who rock Glasto

This was the year of 24-carat Golden Oldies
Paris Fashion Week

Paris Fashion Week

Thom Browne's scarecrows offer a rare beacon in commercial offerings
A year of the caliphate:

Isis, a year of the caliphate

Who can defeat the so-called 'Islamic State' – and how?
Marks and Spencer: Can a new team of designers put the spark back into the high-street brand?

Marks and Spencer

Can a new team of designers put the spark back into the high-street brand?
'We haven't invaded France': Italy's Prime Minister 'reclaims' Europe's highest peak

'We haven't invaded France'

Italy's Prime Minister 'reclaims' Europe's highest peak
Isis in Kobani: Why we ignore the worst of the massacres

Why do we ignore the worst of the massacres?

The West’s determination not to offend its Sunni allies helps Isis and puts us all at risk, says Patrick Cockburn
7/7 bombings 10 years on: Four emergency workers who saved lives recall the shocking day that 52 people were killed

Remembering 7/7 ten years on

Four emergency workers recall their memories of that day – and reveal how it's affected them ever since
Humans: Are the scientists developing robots in danger of replicating the hit Channel 4 drama?

They’re here to help

We want robots to do our drudge work, and to look enough like us for comfort. But are the scientists developing artificial intelligence in danger of replicating the TV drama Humans?
Time to lay these myths about the Deep South to rest

Time to lay these myths about the Deep South to rest

'Heritage' is a loaded word in the Dixie, but the Charleston killings show how dangerous it is to cling to a deadly past, says Rupert Cornwell
What exactly does 'one' mean? Court of Appeal passes judgement on thorny mathematical issue

What exactly does 'one' mean?

Court of Appeal passes judgement on thorny mathematical issue