Computer games specialist Game signalled today that full-year earnings would be “substantially” below expectations after levels of supply to the UK of Nintendo Switch failed to meet demand.
Here is how the City reacted to Game’s warning. The retailer’s shares plunged 30% in the immediate aftermath.
Nick Bubb, independent analyst
“Game say that the Spanish business has traded strongly in the second half, but blame poor supply of the new Nintendo Switch console to the UK market for the sales shortfall.
“The company makes more bullish noises about prospects for the next financial year, but the jaundiced City will no doubt take this with a large pinch of salt, particularly as the company refers to the fact that ‘the group is exploring new funding arrangements to enable an acceleration of the roll-out of the new in-store gaming initiative’.”
Sanjay Vidyarthi, Canaccord Genuity
“The Game management team is positioning the business well strategically, aided by an average lease length of just 1.2 years and the Belong [in-store gaming arenas] concept.
“As so often, though, the carpet has been pulled from under their feet by market factors out of their control.
“The company maintains its view that full-year ’18 should be a stronger year as Nintendo supply improves and the new Xbox comes to market. There is also a stronger pipeline of software.
“At this stage, it is clearly difficult to plot the trajectory of any recovery.”
Adam Tomlinson, Liberum
“Management sees more encouraging signs heading into the next financial year. In particular, these include the ongoing strong demand for the new Nintendo console, which should be supported by improved supply, and Microsoft’s new Xbox One X console coming to market in November, where pre-orders have been encouraging.
“A stronger schedule of new software releases across all three platforms (Xbox, PlayStation and Nintendo) is also expected to support growth across both the UK and Spain.
“Further progress with the UK’s Belong continues. There are now 12 locations, which have delivered a strong trading performance, and management is considering new (debt) financing options to support a possible acceleration of the roll-out across the UK store base.”
Paul Hickman, Edison
“The company expected half-two sales to be underpinned by the Nintendo Switch console launch in March, always dependent on stock availability.
“In fact, despite strong demand, supply to the UK for Switch has been lower than expected.
“As a result, EBITDA for the year is now expected to be substantially below previous expectations.
“Moving into full-year ’18, the positive demand for the Switch should benefit results, albeit from a lower base.
“In addition, interest is building in the new Xbox One X console, expected in November 2017, and there is a stronger line-up of new releases on Xbox, PlayStation and Nintendo.
“Development of new Belong in-store gaming arenas is progressing, and the concept now trades in 12 locations, with an expectation of 20 in the full year.
“This is lower than our forecast assumption of 30, but we did not expect significant profit contribution in the year from these developments.”