“The switch over from the older gaming formats to PlayStation 4 and Xbox One software has impacted profitability across the UK market. The extent of the impact of this switchover has only become apparent in December,” he said.
Game still has the rest of the Christmas period to salvage results and expects margins to recover in the second half of its financial year, but UK sales are down more than 11% year on year so far.
Canaccord Genuity’s Simon Davies said: “Game is just heading into its peak sales period, so this is a particularly disappointing update.”
Game, which sells titles such as Call of Duty Black Ops, has 319 stores in the UK as well as 275 in Spain, where trading is much stronger.
The catastrophic warning sent the shares tumbling below the 200p at which it rejoined the London Stock Exchange in April 2014, two years after it was forced to call in administrators.
Canaccord Genuity, HSBC and Liberum were the advisers on the float.
US activist investor Elliott Advisors, which backed turnaround specialist OpCapita’s rescue of the firm, still owns 44% of the retailer and saw more than £50 million wiped off its stake.
Analysts also said the dividend could be under threat as it is only half covered by this year’s expected profits.
Liberum’s Tom Gadsby said: “While the company still intends to update the market on Christmas sales in mid-January, we think that a decision on the dividend may be deferred until the interim results in March when the company has a much clearer idea of full-year profits.”
