UPDATE: Game On For New Game Group CEO But Tough 2H Ahead

17th Jun 2010 11:59

(Adds executive comments, share price and analyst comments.) By Rachael Gormley Of DOW JONES NEWSWIRES LONDON (Dow Jones)--Video game retailer GAME Group PLC (GMG.LN) Thursday named Ian Shepherd as its new chief executive but said management would continue to face tough trading conditions after a difficult start to the fiscal 2011. Game now expects full-year gross margins to fall around 100 basis points on the year and anticipates negative full-year like-for-like figures. Two of Game's most senior figures--CEO Lisa Morgan and U.K. Chief Operating Officer Terry Scicluna--resigned in April following a full-year profit slump. Interim Chief Executive Chris Bell said Shepherd--who starts June 28--will receive a similar remuneration package to Morgan, who took up the CEO role three years ago, 11 years after joining the company. Interim Chief Executive Chris Bell, who himself will return to his role as senior executive director, told reporters on a conference call that Shephed, who has spent the past four years at Vodafone Group PLC (VOD.LN), most recently as U.K. consumer director, that he would continue with the company's planned strategy of reducing costs and looking to add exclusive content to its products. "We will take out around GBP5 million of costs this year and some GBP7 million in 2011," Bell said, adding that store openings would continue to be restricted, probably to around 15 new stores mainly in Spain and Portugal. Meanwhile around 42 stores will close by the end of this week, and Bell said there would likely be another 20 or so closures in Australia and a few in France. Game's operations in France and Australia are expected to move to a break-even point in 2011, the company added. For the first 19 weeks to June 12 GAME, which trades from 641 stores across the U.K., said total group sales were down 11.4% on the year and sales from stores open more than a year fell 12%. In the U.K. and Ireland, total sales were down 19% and in its international business, total sales were up 1.2%. Online sales increased 14%. However the company said it outperformed the market by offering customers exclusive extras on new product releases, such as unique digital weapons and vehicle designs for the game Battlefield: Bad Company 2. Seymour Pierce analyst Freddie George moved to a "hold" rating from a "buy" following the results, citing concerns in structural changes to the company and the growing stronghold of the food retailers in games retail. He reduced the fiscal 2011 pretax profit forecast to GBP50 million from GBP65 million and cut the fiscal 2012 pretax profit forecast to GBP65 million from GBP73 million. At 1050 GMT, shares in the retailer were down 5.3 pence, or 6%, at 82.95 pence, while the wider FTSE All-Share index was up 0.7%. -By Rachael Gormley, Dow Jones Newswires; 44-20-7842-9308; [email protected] (END) Dow Jones Newswires June 17, 2010 06:59 ET (10:59 GMT)