GAME has seen its profits tumble 27 per cent. Why has trading been so tough?
Ben White: We’ve been clear with the market about where we expected to come out. We’ve hit our numbers exactly in line with expectations at £90.4 million profit before tax. If you look at the profile, it is the second best trading period we’ve ever had. Like the wider games market, we have seen our revenues come down. We’ve offset the impact of those revenues by gross margin improvement and a little bit of cost savings. On the back of the wider market place, it is a pretty reasonable performance.
Over the past six months you’ve cut working hours and closed stores. Are these measures to fix issues you are having now? Or are you preparing yourself for tough times to come?
BW: There is a recognition that we need to be in every channel in which the customer is shopping, so stores, ecommerce and digital, and we are adjusting our business to meet what our customers demand.
Was Lisa’s departure a long-time coming, or did it come as a surprise?
Christopher Bell: She had been in discussion with the Board for quite some time, so it didn’t come as a surprise. Lisa, having been a fantastic ambassador and leader of the business for some 14 years, wanted to move on and have a break. So I think that is quite understandable. And the Board, after some discussion, decided to accept her request. She wanted to move on. There’s nothing sinister about it.
What can we expect from her replacement? Are you looking for experts in specific areas, say online or digital?
CB: I wouldn’t draw distinguishing factors between online and digital. What we want is somebody who has a retail background, because we have a huge retail estate across many countries employing lots of people. We would also like somebody that has skills in the new media area, which is ecommerce, digital, mobile and so on. And, equally, someone with PLC experience. If there’s a identikit of what we are looking for via our headhunters, then that’s the target person.
With such senior management changes, can we look forward to a new era for GAME?
CB: It’s obviously going to be a change, because we’re going to have someone at the helm who is not from within the business. So that is a change.
What we are talking about here is continuing to achieve success. I don’t think it is going to be some new Doctor Who-like creation, where within a year GAME metamorphosis into something completely different. It’s a damn good business, it employs a lot of people and it has very real opportunities in the ecommerce section – digital and online – and equally through its store base.
People still do want to go to shops and buy things. This tends to be quite a social activity in its own way, and so that has longevity. But like all big retailers, one of the key aspects is that you’ve got to manage your retail estate, which is what we’re doing. I see it more as an evolution than a revolution. We definitely want someone who is going to help add to the quality of the decision making, implementation, execution and give great energy and imagination. It would be a great job for someone.
GAME’s digital strategy prevously amounted to just a Metaboli service. But recently you’ve launched your PS Moonbase and your iPhone App. Is digital now a significant part of GAME’s plans?
CB: Yes. That is why you are starting to see what you see. I can assure you we have been working on this for about five years. It is not something that we’ve just woken up to. It is a very fast moving, dynamic market sector, and we’ve quite clearly said we are making capital available and revenue investment for this area and we will be a part of it.
Does GAME think that digital will continue to impact retail sales?
CB: It’d be crass to say that there will not be some impact, because that is just reality. But it’s not – as a lot of scaremongers say – a case of: ‘Why would you go buy a game from a shop anymore?’ It just doesn’t work like that. That’s why it’s back to managing your portfolio into a social experience. Digital will grow. I actually think it will grow the market, and you’ll have to manage your retail footprint alongside that. Yes, there will be less stores, but actually they will be bigger, better stores that offer a wider range and do different things. And that’s the way most of retail is developing, whether you’re GAME or Next.
When it comes to doing things differently at store level, HMV has already invested in its Gamerbase proposition. HMV has also moved into events in a big way. Is GAME looking to compete in these areas?
CB: The management team has spent the last six months putting a lot more flesh on the GAME strategy, which includes an approach for digital. We will make some mistakes, I hope. This is a fast moving area, and to be successful you have to get a few things wrong.
It is a difficult thing to assess because it is so fast moving. What you have to do is be judicious with capital, i.e. don’t waste it, and be on the board to play the game. That is exactly where we are. We have extremely comprehensive action plans to get ourselves into a very strong position in this part of the market.
Does the GameStation brand still have a future in your plans?
CB: Yes, it does.
Discounting clearly has a big impact on specialist retail, and the supermarkets are guilty of this more than any other. How have the grocers impacted your results?
BW: You know as well as I do that the supermarkets have been playing in this arena for a long time. We’ve always found we’ve had to compete on price activity on big launches. Our view is that our offer is substantially better than what the supermarkets offer, in terms of value, range, our service and the loyalty impact of what we do. We see the supermarkets competing in our arena, and we believe we have the right armoury to defend ourselves against them.
Do you feel GAME can turn things around this year?
CB: I wouldn’t use the words turn around. Can we improve our lot? Yes we can. Like any business you are going to need a bit of luck. If it is down to the plans we have in place, and if the economy continues to recover – albeit slowly – and we have a bit of luck with the new technology and releases, then maybe we will be sat here next year and say ‘that’s a bit better’. But it is tough out there, and there’s no point pretending otherwise.