'Call of Duty' broke sales records when it was released in November
Shares in the computer games retailer, Game Group, have tumbled 13% after it said like-for-like sales fell 13.9% in the 18 weeks to December.
Game said price cuts on Microsoft's Xbox 360 Elite and Sony's Playstation 3 increased demand, but not enough to offset a fall in hardware revenue.
It also noted the strong competition it faces - particularly from supermarkets.
The firm said "prevailing video games market trends lead us to approach the critical Christmas period cautiously".
"Today's data implies that trading over the most recent 11 weeks has improved, but only marginally," said Mark Photiades, an analyst from Singer.
"This is clearly worse than we had assumed. This year in particular Game will be looking to pick up at least its fair share of Woolworths and Zavvi's video game business."
Game trades from more than 1,350 stores in nine European countries and Australia.
Its share price has fallen 16% since it released its half-year results in September.
In early Tuesday trading its shares were down 19 pence or 13.1% to 126p.