* Sees revenue growth "challenging" in 2009
* FY to end-Jan 2009 profit seen ahead of hopes
* 6 weeks to Jan. 10 like-for-like sales up 5.4 percent
* Shares fall as much as 12 percent
(Adds detail, comments from Game executives, analyst, shares)
By James Davey
LONDON, Jan 13 (Reuters) - British video games retailer Game Group Plc warned of a tough year ahead due to the UK retail downturn, offsetting a strong performance over Christmas and sending its shares up to 12 percent lower.
Game, which trades from more than 1,340 stores, concessions and franchises in nine European countries and Australia, said it expected to be hit by the deterioration in economic conditions despite recent strong sales of titles such as Call of Duty: World at War and FIFA 09.
"Revenue growth for the group will be challenging and there will continue to be inflationary pressures on costs," it said.
Game was consequently planning a slower expansion.
David Thomas, deputy CEO and group finance director, told reporters the retailer was targeting about 70 new stores in the year to end-January 2010, down from about 200 in the current year.
Altium Securities analyst David O'Brien reiterated his "sell" stance on the stock forecast a fall in year to end-January 2010 underlying pretax profit to 88.6 million pounds.
"Our belief is that the main feature of FY 2010 and beyond will be discounting of software and as a result falling gross margins," he said in a research note.
By 1040 GMT, shares in Game were down 9.25 pence, or 6.3 percent, at 137.75 pence, valuing the business at 477 million pounds.
Before Tuesday's update, shares in Game had lost 37 percent of their value over the last year, underperforming the FTSE All Share General Retailers index by 5 percent.
Game's downbeat outlook came as the group forecast full-year profit "slightly ahead" of market expectations and emerged as one of the winners of the Christmas trading period.
For the six weeks to Jan. 10 sales at Game stores open more than a year increased 5.4 percent, while total sales increased 16.6 percent.
The group benefited from stellar demand for games such as Call of Duty: World at War, FIFA 09, Guitar Hero World Tour, and Wii Fit. Gaming is also seen as a more affordable alternative to many other family leisure activities.
"The group has traded well in the year to date and the board now expects the group profit before non-recurring costs and tax for the 53 weeks to Jan. 31 to be not less than 122 million pounds ($182.4 million)," it said.
In the previous year Game made 75.5 million pounds.
The UK and Ireland business, which saw like-for-like sales increase 10 percent over the six week period, benefited from rivals Woolworths and Zavvi both going into administration and having limited availability of stock.
With Woolworths and Zavvi previously having about 10 percent of the UK gaming market, their demise has provided Game with a significant opportunity to gain market share.
"A number of players will benefit ... such as HMV, Argos and the supermarket sector ... We'll do as much as we can to secure as many of those customers going forward," Chief Executive Lisa Morgan told reporters.
For the 50 weeks to Jan. 10, group sales increased 24.2 percent.
Game forecast a full-year gross margin about 140 basis points ahead of last year at 26.2 percent, slightly ahead of previous guidance, and anticipated net cash of 30 million to 40 million pounds at end-Jan. 2009. (Reporting by James Davey; Editing by Rhys Jones and Andrew Macdonald)