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27 September 2011 09:55
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Computer and video games retailer Game is pinning its hopes on good Christmas trading to lift its full year performance after reporting a jump in half-year losses today.
Game blamed a combination of a "cyclical low point" for the sector, as new hardware is developed, and the tough economic backdrop as sales slumped by 10.5% to £558.8 million in the six months to July 31st.
Losses soared to £51.5 million from £21.5 million as margins also came under pressure after it invested heavily in promotions to get sales moving.
Sales in the second half weakened further, with like-for-like revenues for the 34 weeks to September 24 down by 10.4%, but the group hopes a new batch of top-ranked game releases in the run-up to Christmas can still turn things around as the group makes 40% of its revenues over the next ten week period.
Potential bestsellers include FIFA 12, Call of Duty: Modern Warfare 3 and Assassin's Creed Revelations.
Chief executive Ian Shepherd said trading conditions will remain "tough" but added the group is determined to outperform the market over the rest of the year.
Directors of the group, which has 615 stores in the UK and Ireland, have committed themselves to the recovery by agreeing to spend at least 20% of their salary and fees to buy shares over the next 12 months.
Mr Shepherd said that to meet revenues and margin targets, Game will need to achieve year-on-year revenue growth in the second half and a better gross margin than the first half, but conceded this will be challenging.
"The current shape of both the wider economy and the PC and video games market leaves us under no illusion about the challenges we face in the remainder of the year," he added.
For the full year, the group forecasts revenues will recover to a fall of between zero and 3% over the previous year, while margins should recover slightly with cost savings of between £6 million and £9 million.
The forecasts are based on an uplift in the market overall after a first half contraction of 15.5%. Pre-orders for Christmas are encouraging, said Mr Shepherd, while developers are also upbeat about potential sales.
Kate Calvert, an analyst at broker Seymour Pierce, said that while Game has secured a record 18 special editions on the expected top 20 software titles this Christmas, supermarkets will be very aggressive on prices of basic versions.
Next year will also see the launch of Sony's new PlayStation Vita handheld console and Nintendo Wii U console in Europe, which could give the whole market a boost though Game would not quantify what kind of uplift it expects.
