UPDATE 3-UK retailer Game's sales dip worsens; shares fall

* 21 weeks to June 27 sales down 15 pct

* Says has seen good margin growth, maintains guidance

* Sees H1 underlying pretax profit of 13-16 mln stg

* Shares down 9 pct (Adds further detail, comments by CEO, analyst; updates shares)

By James Davey

LONDON, July 2 (Reuters) - British video games retailer Game Group Plc (GMG.L) on Thursday reported an accelerating decline in sales, only partly offset by better profit margins, sending its shares as much as 11 percent lower.

The group, which trades from 1,367 stores, concessions and franchises in nine European countries and Australia, said like-for-like sales fell 15.4 percent in the 21 weeks to June 27.

This compares with a fall of 6.3 percent for the 11 weeks to April 18, indicating underlying sales have slumped by about 25 percent over the latter 10 weeks.

Chief Executive Lisa Morgan blamed the decline on an exceptionally strong release schedule in the previous year. She said the software release schedule for the second half of the current year was much stronger than the first half, with titles including Wii Fit Plus, Singstar: Take That, and Forza Motorsport 3 due for release.

"Although we have seen further like-for-like declines ... this was expected, given the exceptionally strong trading period last year when sales were up 25 percent on the back of record breaking launches such as Mario Kart, Wii Fit and Grand Theft Auto IV," Morgan told reporters.

But analysts said the numbers were worse than they had anticipated.

"These sales performances are weaker than we have assumed in H1," said David Stoddart, analyst at Altium Securities, who cut his year to Jan. 31 2010 underlying pretax profit forecast to 115.9 million pounds ($190.6 million) from 118.2 million pounds.

In the previous year the group made 126.2 million pounds.

Game's shares were down 9 percent at 149.75 pence at 0953 GMT, valuing the business at 519 million pounds.

Before Thursday's update the stock had lost 43 percent of its value over the last year on fears of slower growth, lack of newsflow on the next generation of consoles and the threat of digital distribution, underperforming the FTSE All Share General Retailers index .FTASX5370 by 49 percent.

"Against our full year assumptions the performance in H2 is now looking quite stretched, and assumes a significant pick-up in like-for-like trends and sales transfer from failed competition (Woolworths and Zavvi)," analysts at Singer Capital Markets said in a research note.