Shares in Game Group slipped more than 12% today despite a rise in like-for-like sales over Christmas.
The computer game retailer warned of challenges ahead in 2009 and said it would follow a "more cautious" expansion strategy. The group has more than 1,340 stores, with around 700 in the UK and Ireland.
"The board is cautious about the outlook for 2009 and is aware that general economic conditions are likely to deteriorate further," said chairman Peter Lewis. "Revenue growth for the group will be challenging and there will continue to be inflationary pressures on costs."
Teathers analyst Mark Photiades warned that Game faced greater competition in the "pre-owned" or second-hand market and the potential contraction of the casual gaming market because of the recession.
He also said internet retailers and digital distribution posed longer-term structural threats, although the collapse of rivals Zavvi and Woolworths would have helped the group.
In the six weeks to 10 January, Game said it had done better in the UK and Ireland than, with like-for-like sales up 10%.
However, the international operations - in France, Iberia, Scandinavia and Australia – saw like-for-like sales drop 3%.
Across the whole group, like-for-like sales increased by 5.4%.
Game said it expected group profit before non-recurring costs and tax for the 53 weeks to 31 January to be "not less than £122m", slightly ahead of market expectations.
Shares in the group fell as low as 129.25p, down 12% on last night's close, before rallying to 139p.
