Game has insisted it needs a large bricks-and-mortar presence despite analysts calling for more store closures to cut costs as the retailer posted widening first-half losses.
Game chief executive Ian Shepherd said the retailer’s UK portfolio is undergoing a “gentle decline” as the games specialist closes stores in locations where it has multiple shops.
Its long-term aim is to get the UK estate down to 550 from 615, and Shepherd told Retail Week that there were no immediate plans to close further swathes of shops, because Game needs a strong store presence to be a truly multichannel retailer.
He also said digital businesses such as online games streaming service OnLive, which it secured a deal with last week, are attracted to Game because of its ability to sell to customers through different channels – including stores.
But analysts are calling for more culling. Panmure analyst Philip Dorgan said: “We think that Game will need to close more stores.
“The games market will move online faster than Game currently expects and it will find it difficult to finance its own move into digital products, while at the same time paying rent.”
Game made a loss before non-recurring costs and tax of £48.5m in the six months to July 31, compared with a £18.8m loss in the same period last year.
The performance was worse than expected, according to Singer analyst Matthew McEachran, who had forecast a loss of £41m. Group turnover declined 10.5% to £558.8m.
Group like-for-likes dropped 9.9%. However, the games specialist said it grew market share.
In the UK and Ireland like-for-likes slumped 10%. Group online sales were up 2.3%.
Current trade has worsened, with group like-for-likes falling 10.4% in the 34 weeks to September 24.
Shepherd said: “The video games market is tougher than anything we expected. But we’ve outperformed.”
Seven Game directors, including Shepherd, will spend at least 20% of their pay on shares over the next year.
Shepherd said it’s a statement of the passion and confidence we have in the business.
Shepherd was hopeful of a strong Christmas, a critical time for games retailers. “It’s plausible to assume the market will turn a little less negative in the second half. But the big risk is, is the consumer going to turn up for Christmas or not?”
Shepherd added that despite the widening loss and fall in sales, Game is still forecasting full year total sales to be down -3% to 0%, which he said “will be a significant overperformance of the market as a whole”.
However, Sanjay Vidyarthi, analyst at Espirito Santo believes it will be a “very tall order for Game to meet market expectations in the current consumer environment” despite the strong Christmas product pipeline.
Dorgan added: “We think that management is way too optimistic in its assumptions and continue to see considerable downside risk.”
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