Computer games retailer Game saw sales sales dip in the first half of the year with conditions remaining challenging, it said.

Like for like sales fell by 2.6% in the 22 weeks to the end of June with a lack of new games and fierce price competiton affecting revenues.

"Trading conditions continue to be challenging with ongoing price deflation and a continued lack of strong software releases," the company said in its trading update.

It added that a new console launch by Nintendo had helped offset some of the decline, which was most marked in the UK and Ireland.

The launch of Sony's new handheld "PSP" will boost sales in the second half, it said, with the eagerly new Sony Playstation 3 and Xbox 360 from Microsoft due to launch in 2006. The number of Game stores will rise above 700 by the end of the year, it added.

The company has also settled a legal claim arising from the acquisition of French subsidiary ABC Games for €3.1m, to be taken as a one-off charge in the interim figures.