Shepherd Speaks

In the short time I have been with GAME, my reasons for joining the business have been strongly reaffirmed. There are few products which evoke the passion and excitement of video games, and it’s a great honour to join a team which is so connected to customers and which excels at demonstrating and selling this fast changing technology.

The Group has secured the leading position in Europe over the last two decades, earning the loyalty of millions of customers and the partnership of key suppliers. The Group has done this by being the industry specialist with a resolute focus on customers; an approach I fully support. However, as our latest results show, the market in which we operate is evolving and we must position ourselves to be the partner of choice for customers and suppliers into the next product cycle – whenever that may be.

When I listen to the questions raised by commentators on this industry and on GAME specifically, I hear two main concerns about the future. At a technological level, I hear debates about digital disintermediation, further hardware cycles and the growing number of ways customers choose to interact with games. At a competitor level, there is the perceived threat of the online players to the retail community and the tactics of generalists in the market.

On the first of these issues, there is no doubt that there is going to be evolution in the technology of our industry and in how consumers buy – it is already visible in the market. It is, however easy to overstate the magnitude and speed of that change – consumers still overwhelmingly prefer to buy video games as physical boxed product and the view of our industry is that this is likely to remain the case for some time. As Sony Computer Entertainment CEO Kaz Hirai recently said To think everything will be downloaded in two years, three years or even ten years from now is taking it a little bit to the extreme.”

However, even as we are cautious about the speed with which the download revolution” will happen, we must be bold in preparing for it. GAME has made investments this year in a wide range of new technologies including mobile apps, digital downloading on the web and even a presence directly in the virtual malls” on consoles themselves. Fundamentally, we believe that the strength of our customer relationships and our brand position as an expert and trusted retailer give us strength in those emerging channels and our investment in them will continue.

On the second issue, that of others challenging our market position, I recognise that there are strong competitors both on-line and on the high-street. The pc and video games market is an attractive one, generating global revenues of about $40bn, and interactive entertainment is a growing part of customers’ leisure time. I believe that to be successful in this industry a retailer must offer a joined up brand proposition across every channel. Most importantly, that proposition must exceed consumer demands for service, range and value. More than in many other sectors, there is a significant place for the specialist retailer in the video games market.

GAME is already a successful specialist retailer across the markets in which we operate. However, to fully address the challenges we face, the business needs to move forwards in a number of areas. Over the coming weeks and months we will be implementing a strategy which amplifies our strengths. I will give more detail in due course, but firmly believe that we can focus our efforts around specific growth areas:

• Building on our community of 15 million GAME Reward Card holders. This customer database is an extraordinarily valuable asset giving us the opportunity to market the right content to the right customer at the right time;

• Growing our online offer and fully integrating it into our in-store experiences. Our investment this year in creating a common underlying IT platform linking stores and the web will deliver significant benefits to customers and the business; and

• Making sure we deliver our expertise and advice to customers at every opportunity – showcasing and demonstrating new products and maintaining our position as the partner of choice for the launch of new games and gaming hardware.

In conjunction with the evolution of GAME’s strategy, I also remain mindful of the need for tight operational and commercial management. A relentless approach to cost and cashflow management will remain a hallmark of the business.

Given the strategic importance of market position to customers and suppliers, we have acted to hold or grow market share in all of our territories, even as the market suffers significant lows compared to the last two years. As a result our margins have been impacted by the delivery of a clear value message to customers.

We have retained a Group-wide focus on sales, focusing on new product launches to drive our market share and customer loyalty, with the result that lfl’s have improved in recent weeks.

We have taken early action to maintain the strength and stability of the business. Operating costs have been reduced as a result of initiatives in our head offices and store networks. New management teams in France and Australia have developed action plans to return those businesses to positive contribution next year.

We have made very good progress on working capital, ensuring future balance sheet strength. We have been very selective with our capital investment decisions, and we will continue to be good custodians of our owners’ assets.

I am energised by the commitment of the team as we prepare for the peak trading season, and the excitement of our customers as they look forward to the packed schedule of new releases.