Despite enjoying an enviable position as the UK and Europe’s leading video games specialist, Game Group, subject of a Retail Week Knowledge Bank profile update, is suffering from falling sales and profits after both peaked in 2008/09.
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UK sales of £935m in 2010/11 were a third below two years earlier, the international network plunged into a £16m operating loss, while online sales were down. In the first quarter of 2011/12 store sales falls accelerated.
There are some obvious parallels with HMV. Like HMV, Game is shifting product balance, to more pre-owned product. Also like HMV, Game’s stores already work hard, with sales densities exceeding £1,000/sq ft, so limiting their upward potential, while employment costs as a proportion of sales are impressively low, but rising. Online sales, too, remain a low proportion of turnover, at just 6%. Management is now committed to improving its online presence, as well as investing in emerging digital and mobile channels.
Management has, though, set few specific targets, but one is driving loyalty scheme revenues from under £5m to more than £100m by 2013, although this would seem a tall order. Indeed, analysis of Game is not helped by management’s reporting being exercises in minimalism, with sparse explanation of performance, wrapped in background market commentary.
For example, ‘non-recurring costs’ of £14.7m, plunging international operations into loss, are obscurely noted as restructuring in Australia and France, ‘explained’ elsewhere as being “to strengthen those businesses”. What was wrong? What is being done now? Investment is going into the troubled markets of Spain and Portugal, accounting for nearly 20% of group sales “where there may [my italics] be tactical growth…opportunities”. What are they?