Game still hopeful of emerging winner as profits tumble 58pc

Underlying profits fell 58 per cent to £37.8m in the year to January 31 as it faced increased competition from supermarkets and consumers downloading games online.

Like-for-like sales at its 639 stores in the UK and Ireland dropped 9.8 per cent in the year and worsened to a 12.4 per cent decline in the 12 weeks since.

But Game shrugged off the worse-than-expected results after it said it was convinced there was still demand for a high street games retailer and claimed that its turnaround plan was positioning the company “in the right place”.

It said its results had outperformed the market and it was operating in “a very challenging economic climate”.

Game launched a three-year turnaround strategy in February, which includes plans for more special offers for its reward card holders and to improve its website to bring about a “step change” in online sales.

It is also rationalising its store estate and has closed 38 outlets in the UK and Ireland in the year. It plans to reduce the number to 550 by Christmas 2013.

Chief executive Ian Shepherd said he is now “more convinced than ever” that there is a role for a strong multi-channel retailer and he believes Game is “uniquely positioned to fill that role”.

Shares, which have lost a quarter of their value in recent weeks, gained 10 per cent following the company’s bullish comments before closing at 48.75p, up 3.5p.

Game, which operates 1,313 stores in territories including France, Scandinavia and Australia, reported that total revenues declined 8 per cent to £1.6bn.

Bottom-line pre-tax profits fell by 73 per cent to £23.1m after taking into account the lower value of some of its properties and closed stores.

Mark Photiades, an analyst at Singer Capital Markets, said weak trading means the City’s profits forecasts for this year are likely to be reduced by between 10 per cent and 12 per cent. He has placed his current estimate for underlying profits of £41m under review.

The company’s long-serving chairman Peter Lewis will step down after the group’s annual meeting on June 15 to be replaced by ex-Ladbrokes boss Chris Bell.