Analysts slashed profit forecasts for Game this week as the retailer downgraded its revenue guidance in the face of a worse-than-expected decline in the games market
Group like-for-likes fell 11.3% in the 19 weeks to June 11. Game said it believes group revenues for the year will be between flat and 3% down on last year. In April, Game said it expected to up sales by between 2% and 5% this financial year.
Peel Hunt analyst John Stevenson said the revised revenue guidance implies a pre-tax profit of between £22m and £29m, versus consensus of £32m. Arden analyst Nick Bubb cautioned against the “structural challenges in the games market”. He added: “The fact is Game has delivered yet another profit warning.”
But he highlighted Game’s “reasonable” balance sheet and the hopes of an upturn in the games cycle next year.
Total group sales were down by 11.3% in the 19-week period, compared with a market decline of 12.8%, according to Game.
In the UK and Ireland, like-for-likes declined 9.1% and across Game’s international businesses, like-for-likes were down 11.8%.
Online sales increased 2.4%. In multichannel, which is one of the key planks in Game’s turnaround
strategy, the retailer has upped its share to 19%, from 13% a year ago.
In the last seven weeks of the period, the like-for-like decline slowed to -4% reflecting its success with the period’s biggest launch, LA Noire. Stevenson added that the 4% drop is “stronger than expected”.
Game retains its margin guidance of -100bps for the year, and expects operating costs to be between £5m and £8m lower than last year.
Last week’s E3 exhibition in Los Angeles showcased new product coming to market in the second half of this year.
Game said that “although impressive, we now believe that this year’s software releases are unlikely to improve the market materially in the short term”.
Group chief executive Ian Shepherd is leading a turnaround at the retailer, hinging on the realignment of its property portfolio, increasing the proposition of unique product, and pushing its pre-owned offer.
He also wants to focus on CRM through its loyalty card scheme, which now has 17.3 million users.
Shepherd said: “We are seeing early results from the strategic initiatives outlined in February, despite the games market being more challenging than anticipated this year.
“Our strategy is designed to strengthen our leading position and drive growth as the market evolves.”
- Game has hired former Mobilephones Direct managing director Tom Devine as regional managing director of the UK and northern Europe.