With the annual spending spree about to kick into top gear UK computer retailer Game has warned that this year is unlikely to be a very merry Christmas.

Publishing a trading update today it warned that sales would be hit by falling prices for long-in-the-tooth systems and a lack of supply of new gaming gear.

"The significant price deflation on hardware and software as the current generation of consoles reach maturity, coupled with the tough retail environment, have resulted in ongoing like for like sales declines for our business," said the retailer today.

"Since our last update on 27 September, the retail trading environment has not improved and the anticipated pick-up in the like for like sales of mature format hardware and software has not materialised in recent weeks."

What's so frustrating for Game is that it reckons there's plenty of people willing to splash out on the latest kit. It describes interest for the Sony PSP as "exceptional" but laments that supplies have been "behind plan and intermittent". It also warned that supply of the new Microsoft Xbox360 will be "extremely limited".

Looking ahead to next year, though, Game reckons that increased supply of new products and titles will help boost income and lead to a "successful outcome for the financial year 2006/07".

By mid afternoon shares in Game had recovered after early falls down 3.75p at 74p. ®