Game the big loser as it waits for Kinect

The huge task facing Ian Shepherd, new chief executive of Game, was laid bare today as the struggling computer games specialist issued its second profit warning of the year and warned of a first half loss. The shares were the biggest faller in the FTSE 250, closing down 5p at 83p after the retailer said like-for-like sales in its British and Irish stores plunged 17.2% in the 19 weeks to 12 June. At a group level like-for-like sales were down 12.3%. Game said it had recruited Shepherd, aged 41, a former Vodafone executive and keen gamer, to start work at the end of this month. He replaces Lisa Morgan who quit in April after presiding over a sharp fall in annual profits. Shepherd, who has also worked for BSkyB, is on a similar pay deal to Morgan who earned £535,000 last year. Game said new titles such as Red Dead Redemption and Battlefield: Bad Company 2 had sold well but not enough to make up for weaker overall demand. According to Gfk Chart-Track market data UK console sales slumped by a third during the period – mainly owing to lower sales of the Nintendo Wii and DS – while software was down 11%, leading to an overall decline of 19%. Last week, Argos owner Home Retail reported a 8.1% decline in first-quarter sales, which it blamed on slumping sales of TVs and gaming products. The games market is a heavily cyclical with each generation of consoles enjoying a lifespan of five to seven years before demand peters out. Game's fortunes are intertwined with new technology launches and sales have been hit as the Xbox 360, PS3 and Wii mature ahead of the launch of a fourth generation of products such as Microsoft's Kinect – billed as the first hands-free gaming device – and the Nintendo 3DS. Game said it would have to cut prices to compete with Argos and the supermarkets but added that it expected to make a profit in the second half which includes the Christmas trading period. Game described it as a "transitional" year for the industry and said it did not expect new technology launches such as Kinect to "materially" impact trading until next year. Game's shares have halved in value over the past year and hopes of a bid from US retailer GameStop have waned. "The market has to balance the poor record of this cyclical stock and fading hopes for a bid from GameStop with the rosier outlook for the new generation of motion-sensitive games and devices," said Arden Partners analyst Nick Bubb. Analysts had expected Game to make a profit of about £64m this year but Singer Capital Markets analyst Matthew McEachran said he expected that figure to be cut by 20% following the update.