The honeymoon period for the new GAME shows no sign of returning with a drop in profit and the news that the retailer's CFO is stepping down.
Group revenue for the 26 weeks ending January 24th fell 0.7 per cent to 586.4m, with gross profit down 1.6 per cent at 137.4m and profit before tax falling 1.8 per cent to 33.8m. The company described the early 2015 video games market as starting more slowly than expected” and suggested some big promotions were on the way this Easter.
On the more positive side, gross transactional value climbed three per cent and GAME's UK market share remained steady at 33 per cent. Growth in pre-owned electronics was said to be strong while digital revenues climbed 40 per cent – with GAME claiming an extra four per cent of the nation's digital console sales.
There has also been a strategic realignment in the company, with three new operating divisions having been formed – GAME Retail, GAME eSports and Events and GAME Digital Solutions.
Chief financial officer Benedict Smith, however, is stepping down later this year. It is speculated that the move is directly linked to January's profit warning. He joined GAME in early 2013.
The video games market remains dynamic and competitive,” CEO Martyn Gibbs said. While we experienced some challenging conditions over the Christmas trading period, we are confident that our strategy of focusing on customer recruitment, combined with the significant and growing number of Xbox One and PlayStation 4 owners across our two major territories, provides a solid foundation from which to drive growth over the medium term.
We have taken important steps in our strategy to broaden our offer beyond purely retail, to the places and ways in which our customers play games, with great support from our supplier partners. Our focus for the second half is to deliver on our trading targets and to continue to push forward our strategic initiatives, including further developing our digital strategy and broadening our engagement with gaming communities through technology, events and eSports following our acquisition of Multiplay.
"In the coming weeks and months we can look forward to a solid line up of new physical and digital games launches. Our pre-order rates on the major titles are encouraging and we have secured exclusive editions on many of the key titles.”
For the UK in isolation, revenues were up 2.4 per cent compared to a (constant currency) 3.9 per cent dip in Spain. With the UK market up 4.6 per cent in the period, that's bad reading from a UK perspective . The Spanish market was down 7.7 per cent, however.
Group-wide pre-owned revenue in the period climbed ten per cent while content fell 5.6 per cent and hardware fell 0.5 per cent. Operating costs increased by 6.3m to 101.7m, with selling and distribution costs up 6.7 per cent to 77.9m.
It was also revealed that GAME's directors have reduced their loan commitment with HSBC to 25m, down from 50m, based on the increased level of supplier credit available and forward forecasts.