Game facing festive gloom as it issues savage profit warning

The firm was caught out by a huge 57 per cent slump in games for older consoles as well as much slower than anticipated sales for the newer Xbox One and PlayStation 4 titles

Game was caught out by a huge 57 per cent slump in games for older Xbox 360 and PlayStation 3 consoles (Getty)

Game Digital suffered a nightmare before Christmas as a savage profit warning sent the retailer’s shares plunging by more than a third, wiping more than £100m off the value of the firm.

Game, which only recently returned to public markets after going bust in 2012, was caught out by a huge 57 per cent slump in games for older Xbox 360 and PlayStation 3 consoles.

Gamers were also much slower than anticipated in snapping up titles for the newer Xbox One and PlayStation 4 consoles, the firm said.

As a result underlying profits for the 26 weeks to 23 January are likely to crash to around £30m, 30 per cent below last year’s £43m.

The shares tanked, tumbling 38 per cent, or 77.5p, to 128p and sending the company’s value crashing by £130m.

The chief executive, Martyn Gibbs, highlighted disappointing sales since the start of the school holidays, adding that trading had been “challenging”.

“The switch over from the older gaming formats to PlayStation 4 and Xbox One software has impacted profitability across the UK market. The extent of the impact of this switchover has only become apparent in December,” he said.

Game still has the rest of the Christmas period to salvage results, and expects margins to recover in the second half of its financial year, but UK sales are down more than 11 per cent year-on-year so far.

Simon Davies, an analyst at Canaccord Genuity, said: “Game is just heading into its peak sales period, so this is a particularly disappointing update.”

Game has 319 stores in the UK as well as 275 in Spain, where trading is much stronger.

The catastrophic warning sent the shares tumbling below the 200p at which it rejoined the London Stock Exchange in April 2014, two years after it was forced to call in administrators. Canaccord Genuity, HSBC and Liberum were the advisers on the float.

The US activist investor Elliott Advisors, which backed the turnaround specialist OpCapita’s rescue of the firm, still owns 44 per cent of the retailer and saw more than £50m wiped off its stake.

Analysts also said the dividend could be under threat as it is only half covered by this year’s expected profits.