UPDATE 3-Game warns on profit, names new CEO

Thu Jun 17, 2010 6:18am EDT

* Forecasts H1 loss, H2 profit

* 19 weeks to June 12 like-for-like sales down 12.3 percent

* Expects year gross margin fall of 100 basis points

* Says Ian Shepherd to start as CEO on June 28

* Shares down 5.89 percent

(Adds interim CEO, analyst comment, shares)

By James Davey

LONDON, June 17 (Reuters) - British computer games retailer Game GMG.L named Ian Shepherd, a former Vodafone (VOD.L) executive and "Modern Warfare 2" obsessive, as its new boss and showed the tough task he faces by warning of a first-half loss.

Game, which trades from 1,343 outlets in nine European countries and Australia, also said it expected sales at stores open over a year to fall in its year to end-January and forecast full-year gross margins down about 100 basis points as it cuts prices to stay competitive.

The sales fall reflects a sharp decline in the PC and video games market globally and intense competition from supermarkets and online operators.

Game said it would not materially benefit from new technology releases until 2011 but expected a profit in its second half, which includes the key Christmas trading period.

Its shares, which have halved in value over the past year, were down 5.89 percent at 83.05 pence by 1015 GMT, valuing the business at about 287 million pounds ($420.8 million).

"The market has to balance the poor record of this cyclical stock and fading hopes for a bid from U.S. peer GameStop (GME.N), with the rosier outlook for the new generation of motion-sensitive games and devices highlighted at the E3 tradeshow in the U.S. this week and to be launched pre-Christmas," said Nick Bubb, analyst at Arden Partners.

Shepherd, 41, a keen gamer for over 30 years, will take up his post as chief executive on June 28, the company said.

Shepherd, who has also worked for BSkyB (BSY.L), will receive a remuneration package broadly similar to that of his predecessor Lisa Morgan who quit the company in April after a 27 percent fall in full-year profit. Morgan made 535,000 pounds ($784,400) in 2009-10, down from 912,000 pounds in 2008-09. [ID:nLDE63I0XZ]

NO CHANGE IN STRATEGY

Interim CEO Chris Bell said a new CEO would not mean major strategic change.

"The Plc board has been through a very comprehensive strategy review so the absolute direction of the business I would expect there to be very little change," he told reporters.

But he expected Shepherd to bring his "consumer centricity" to Game, updating the market in September.

Singer Capital Markets analyst Matthew McEachran said he expected consensus estimates for a 2010-11 pretax profit of 64 million pounds to be cut in the region of 20 percent.

Game said like-for-like sales fell 12.3 percent in the 19 weeks to June 12, a slight improvement on a decline of 14.4 percent in the 11 weeks to April 17.

Game said UK and Ireland like-for-like sales fell 17.2 over the 19-week period, outperforming a 19 percent fall in the overall British market.

Last week, Argos owner Home Retail (HOME.L) posted a bigger-than-expected drop in first-quarter sales, partially blamed on a 20 percent fall in sales of video games, and a 30 percent drop in hardware sales. [ID:nLDE6580SG]

But on Tuesday Tesco (TSCO.L), Britain's biggest retailer, said its market share in games grew in its first quarter. (Additional reporting by Mark Potter; Editing by Dan Lalor and Sharon Lindores) ($1=.6820 Pound)

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