Computer game retailer Game Group has rushed out a reassuring trading statement after last week's share slump. The fall followed the £5.5m sale of shares by two directors, including chief executive Lisa Morgan.
Today, Game said full year profits would be not less than £74m, up from the £73m it indicated in its Christmas update on January 15. It expects better synergies from its merger with Gamestation, which was finally cleared by regulators in January, and also said the new financial year had started well.
The shares responded with a 5p rise to 191.25p, but many analysts were not so convinced.
Shore Capital, Altium and Dresdner Kleinwort all issued sell notes. Shore said: "Over the immediate term, we believe trading should remain robust. However, while we expect profits to hold up in the current financial year, we believe investors should look to exit now, before trading conditions begin to deteriorate. In 2002, Game's share price fell from over 154p to around 34p as the console cycle peaked. While we expect profit generation to prove more resilient this time, profits are still likely to fall with the cycle and we do not believe it is worth waiting for the turn; follow the directors' lead and take profits now."
However Oriel Securities issued a buy note, saying Game had come out fighting. It said: "Pre-tax profits for the year just ended will be at the top end of the range but more importantly like-for-like sales for the current year will be positive, in the range of +5 to +10%. Coming off the back of an explosive year of growth (+45% like for like) to January 2008 this is a very welcome surprise and will prompt upgrades on the back of higher gross margins and stronger sales."
And there are software product launches to come, including the Wii Fit on April 25, which has been popular in Japan. This is expecting to sell for around £70.
More broadly, shares have cut their losses after benign US factory figures showing manufacturing had contracted less than expected. Wall Street had initially opened sharply lower on continuing recession fears, but is now down around 7 points after the factory survey. The FTSE 100 is 34.8 points lower at 5849.5.
