Just two days before Christmas, Game Digital issued a profit warning off the back of slow sales throughout December. Video games had fallen 11.4% in the 21 weeks to 19 December and the gaming retailer feared for trading over the 12 days of Christmas.
Gross transaction value, which reflects full sales, was down 0.4% in the three week period to 9 Jan – not as bad when compared with the 6.7% fall in the first 21 weeks of the full year.
So trading conditions have slightly improved since the pre-Christmas alert, but it can’t be ignored that the UK’s peak trading performance was largely impacted over the 24 weeks to 9 January.
Spain is performing well and Chief Exec Martyn Gibbs has outlined his commitment to “taking appropriate actions” in riposte to the challenged
domestic market, but will it be enough?
“Alongside pursuing commercial developments we are focused on driving operational efficiencies and the group has already begun to implement a series of initiatives to deliver an improvement in the profitability of our UK business,” said Gibbs.
“Looking forward, we see a solid schedule of new games releases planned during the second half of our financial year,” he added.
“Today’s lacklustre update from GAME comes as little surprise,” comments David Alexander, a consultant at Conlumnio.
“Despite a marginal improvement in the final three weeks of this period (it’s Christmas trading period), sales for H1 overall make for dismal reading. In a reversal of fortunes from this time last year, it is now the UK market which is proving to be a drag on performance, with Spanish sales actually showing some impressive growth (up 10.6% over Christmas and 8.8% in H1 overall).”
Alexander continues: “Bemoaning the decline in the market for lower margin, older games consoles for its current malaise, GAME is clearly pinning its hopes on a return to form for the more lucrative Next Gen consoles, which, after an initial surge, have seen hardware sales slow down significantly. However, the fact that the Next Gen consoles were launched only relatively recently means that GAME should still be enjoying the fruits of a honeymoon period. The fact that sales have already begun to suffer this way is worrying, as is the trend for digital content increasingly becoming the dominant segment of the market. With take up of games on the new consoles also proving to be a slow burn, GAME will need to hope that the pace and quality of software releases improves.
Far from oblivious of its potential fate, GAME has been making valiant strides, to diversify its revenue streams, tapping into consumer enthusiasm for gaming by putting on popular events (a strategy which led it to the purchase of eSports organiser Multiplay early last year) and increasing its supply of pre-owned software and even pre-owned devices, such as smartphones and tablets.“