Game Group moved to silence its critics yesterday by raising profit forecasts and saying that there was little sign of an end to the boom in Britain's video games market.

Only a week after the high street chain's two senior directors sparked a sharp share fall by selling £5.4 million of stock, Game said that its outlook was even more positive than it had been at the start of the year.

The trading statement came as market figures showed that video games had outsold recorded music across the UK for the first time last year, generating more than £1.7 billion of revenue.

Game said that it expected to announce pre-tax profits of £74 million for the financial year just ended, £1million higher than City forecasts. It added that like-for-like sales growth could be as much as 10 per cent in the current year.

That compares with 43 per cent last year, but that was largely down to the launch of eagerly awaited next-generation consoles such as the PlayStation 3 and Nintendo Wii. The price of the PS3 has fallen since by more than £100.

David Thomas, Game's deputy chief executive and finance director, said: “We hope today's trading statement will reassure people. We just wanted to point out that things haven't changed since January. If anything, our outlook since is even more positive. Like-for-like growth will be lower, but for a retailer at the moment to be able to forecast growth of 5 to10 per cent, we are pleased.”

Shares in Game rallied 4p to 190p. They fell 17 per cent last week after Mr Thomas and Lisa Morgan, the chief executive, sold 2.3 million shares, fuelling concerns that the directors expected a downturn in trading this year.

The video games market has been dogged by cyclical slowdowns ever since Sony launched the first PlayStation video games console in 1995.

However, industry experts believe that the present upturn will last at least until 2010, given the continuing demand for the Wii and a strong line-up of new games this year.

As well as Grand Theft Auto 4, Nintendo is launching the Wii Fit in April, with which gamers can use a balance board for virtual ski-ing, keep fit and practise yoga.

Sales of PlayStation 3 are also expected to rise sharply in the coming months after Sony's victory over Toshiba in the high-definition DVD market with its Blu-ray technology. Each PS3 can read and play Blu-ray DVDs.

Dorian Bloch, a director at ChartTrack, the entertainment market research company, said: “For software 2007 was the biggest year ever, but we estimate that the market is going to grow in both 2008 and 2009. PlayStation 3 will begin to really take hold of the market in 2008, the Nintendo Wii will carry on and the Xbox 360 clearly has a very strong presence.”

He said that sales of video games could hit £2billion in 2008, nearly as much as the figure generated by DVD sales. The Entertainment Research Association said yesterday that video game sales had topped £1.7 billion last year, up 26 per cent.

Game Group shares hit 250p at the start of January, shortly before the Competition Commission cleared its acquisition of Gamestation, its smaller high street rival.

Eithne O'Leary, an Oriel Securities analyst, raised her forecast for Game's profits in 2008-09 by 10 per cent. She said: “Having been unfairly punished following the directors' share sales last week, Game has done what good management teams do best, let the numbers do the talking.”

Mr Thomas sold a million shares last Tuesday. Ms Morgan sold 1.3 million. Mr Thomas has been able to sell his company options only since the start of this year. He said: “It was just a normal part of the remuneration package.”

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts