Supermarket stock shock looms as EUK relations falter

MCV understands that UK publishers are increasingly wary of pushing stock through EUK ahead of the Christmas rush – and are considering cutting out the distributor entirely.

The mayhem began on September 17th, when the Woolworths Group PLC reported a 100m loss for the first half of the year.

Two of the games industry’s biggest credit insurers – Coface and Atradius – allegedly pulled cover for products being sold through the Woolworths Group, with the third and final insurer, Euler Hermes, reducing its cover.

With publishers left in the position of shelling out for their own insurance on titles sold into EUK’s retailers, some were left questioning the value of the firm’s distribution supply chain.

Previously, EUK had a period of around 60 days credit to provide payment to suppliers. But some publishers are thought to have now begun demanding immediate payment for stock – an ultimatum EUK has apparently found it hard to meet.

Concerned publishers may now even hold back stock from EUK and its partners, such as Asda, Morrisons, Sainsbury’s, Zavvi and WH Smith.

That could mean a stock crisis for these retailers this Christmas – but a bumper festive period for GAME and indies, as publishers squeeze as much product into these channels as possible to make up for the shortfall within EUK’s high-profile accounts.

The boss of one huge global publisher told MCV: "The publishing community feels very exposed by this situation. EUK is telling publishers that everybody else is being flexible but we know damn well it’s not the case, because we all talk to each other. We’re waiting for the timebomb to explode, and we can’t diffuse it."

A UK publisher boss added that his firm is likely to join those demanding immediate payment for stock from EUK – but that it was also striving to set up a direct relationship with its supermarket partners.

"We need to have a relationship with some of the biggest players in the market – which include Morrisons, Asda and Sainsbury’s," he said.

"EUK isn’t a customer, it’s a route to market. They’re not a priority for us – getting stock to retail is. We’ll support whichever route to market retailers choose. If we have to sell direct, we’ll do it."

Despite those at the very top of publishers telling MCV that they were nervous Woolworths wouldn’t be able to pay its lease for the third quarter this month – risking insolvency and the demise of EUK – the company has moved to dismiss the rumours.

A spokesperson told MCV: "The Board of Woolworths Group is comfortable with our financial and cash position. We continue to work closely with suppliers and credit insurers in what is a difficult environment for retail and wholesale."

"While it is true that some credit insurers are tightening trade terms, we are trading as normal with our suppliers and continue to do so. EUK will work closely with all of its customers and suppliers to ensure a successful Christmas period for all."