UPDATE 2-Ladbrokes hit by sharp drop in retail betting

* New CEO says Ladbrokes needs to regain "primacy"

* Expects boost from soccer World Cup

* Operating profit rises 3 percent

* Over-the-counter net revenue down 11 percent

* Shares down 2.3 percent

(Adds CEO, analyst comment, shares)

By Matt Scuffham

LONDON, May 14 (Reuters) - British bookmaker Ladbrokes (LAD.L) reported a fall in revenue in the first four months of the year as the amount of bets placed in its shops declined sharply, partly due to January's bad weather.

Ladbrokes performance has lagged behind its major rival William Hill (WMH.L), particularly online, and new Chief Executive Richard Glynn, who joined the company last month, faces the challenge of rejuvenating the Ladbrokes brand.

"There's no doubt that it is an extremely competitive environment and I think that in both the offline and online arena we can see a clear case for Ladbrokes needing to regain its primacy," he told reporters on a conference call on Friday.

Ladbrokes, which has over 2,750 betting shops, said net revenue fell 6 percent, incorporating an 11 percent drop in revenue from bets placed over-the-counter. Gross win -- total bets minus payouts -- from gambling machines rose by 1 percent.

It said group operating profit rose by 3 percent in the first four months of 2010, reflecting the benefits of the company moving its online gambling operation to Gibraltar, cutting costs in its UK retail operation and a VAT refund.

Glynn said group profitability in the year to date was in line with its expectations but the economic environment remained challenging, with the strength of UK consumer confidence difficult to gauge following the election.

He cited the forthcoming soccer World Cup as a "major event for the whole gambling industry" but declined to give a forecast on how much it would add to full-year profit.

William Hill expects the competition to add at least 10 million pounds to 2010 profits. [ID:nLDE61N2LH]

Ladbrokes shares, which have fallen 19 percent over the last year, were down 2.3 percent to 147.4 pence at 1005 GMT, valuing the business at 1.29 billion pounds ($1.88 billion).

KBC Peel Hunt analyst Nick Batram said an unimpressive revenue performance had been mitigated by cost improvement but questioned how the company would drive profit growth once cost saving opportunities had been exhausted.

"The update highlights the recovery potential at Ladbrokes but identifying it and delivering it are two different things," Batram said. "The new CEO may deliver a strategy to transform a lacklustre online performance, but right now William Hill continues to look the better bet."

Ladbrokes and other operators of high street betting shops, such as William Hill and Paddy Power (PAP.I), were hit harder by the economic downturn than anticipated, having previously been thought of as relatively recession resilient because of the habitual nature of gamblers.

In February, Ladbrokes reported a slump in 2009 pretax profit, hit by the recession and football results that went against the company, and warned that 2010 would be equally tough. [ID:nLDE61G26C]

William Hill, in contrast, said it had made an encouraging start to the year as its 2009 results topped market forecasts, while Paddy Power's full-year earnings decline was not as bad as anticipated. [ID:nLDE63R0MM] [nLDE6210CG] (Editing by Julie Crust, Mike Nesbit and Karen Foster) ($1=.6859 Pound)