LONDON British video games retailer Game Group GMG.L reported a big rise in sales on Tuesday, boosted by strong demand for consoles such as the Nintendo Wii and new titles which have successfully reached into the mass market.
"Customers are buying these video games so that they can sing, they can dance, they can play tennis -- it is truly a mass market entertainment medium now," Chief Executive Lisa Morgan told reporters.
Traditionally dominated by sports and racing games aimed at teenage boys, the video games charts are filling up with new titles such as the educational "Brain Training" and sing-a-long "High School Musical."
Game Group, which sells computer and video games, consoles and accessories from around 1,150 shops, concessions and franchises in Britain and abroad, said like-for-like sales were up 44.1 percent in the 45 weeks to December 8.
"Our performance at this time is slightly ahead of our expectations," Morgan said on a conference call, adding that she was mindful that the group was approaching the key Christmas period which usually accounts for 20-25 percent of annual sales.
However, the firm also said strong demand for games consoles, which are much less profitable than software sales, was hitting its margins.
It now expects the gross margin for the year ending January 31 to fall by between 275 and 325 basis points, slightly worse than it had previously forecast.
"We've seen all of the console platforms perform very well -- huge demand for the Nintendo Wii, as is well publicized, and the Nintendo DS, and good sales of the other formats such as the Playstation 3 and the Xbox 360," Morgan said.
Finance Director David Thomas added: "We're certainly comfortable with the overall position that we have in terms of (analysts') consensus forecasts."
Game Group is expected to post a profit before tax and one- off items of 52.2 million pounds ($106.5 million) for the year to January 31, up from 29.5 million the year before, according to the average forecast of 11 analysts polled by Reuters Estimates.
At 0355 EST, Game Group shares were up 1.8 percent at 246.75 pence, valuing the firm at about 791 million pounds.
"Stunning trading update from Game Group," Seymour Pierce analysts wrote in a research note, adding they expected to increase their current top-of-the-range profit forecast of 56.4 million pounds to over 60 million pounds.
(Reporting by Mark Potter; Editing by Quentin Bryar and Erica Billingham)