GAME profits fall 27% after disappointing Christmas

The poor performance of video games over Christmas has unsurprisingly impacted GAME's profits.

The retailer's pre-tax profits fell 26.5% to £16.5m (from £22.5m) in the 26 weeks ending January 28th. GAME blames the drop on a series of issues, including falling hardware sales, disappointing performances from titles such as Call of Duty: Infinite Warfare, and an overall weaker release slate. CEO Martyn Gibbs highlights the absence of a Fallout 4-sized game last Christmas (the previous year benefitted strongly from that game). Indeed, whereas there were five games that sold over 1m copies in 2015, there were just three in 2016 (FIFA 17, Call of Duty and Battlefield).

Revenues were down 9 per cent, from £549.2m to £499m.

The declines are almost entirely down to the core UK business, with growth occurring in its Spanish arm alongside increased sales in areas such as technology (including pre-owned mobile phones and tablets), PC accessories and VR. Overall, 'new retail categories' are up 28.3%.

Its events, eSports and digital business is growing rapidly, but the added investment in this area means that losses widened to £5.6m from £2.4m over the previous year.

GAME also lost 3% of market share in the console business.

However, things have picked up since then. The firm says its market share has recovered in the period since January 28th to now, boosted by the strong performance of Horizon: Zero Dawn, Ghost Recon: Wildlands, Mass Effect Andromeda and, particularly, Nintendo Switch. GAME says its business is up 20% for the first seven weeks of the second half compared with the same period a year before.

GAME says it has secured £5m in cost savings from its core UK business, helped by renegotiating leases and moving some of its stores into new locations (overall, GAME has 8 fewer stores than previously), however, increased expenditure on eSports - plus currency issues with the Euro related to its Spain business - means that costs actually increased 2.6% (or £2.5m) overall.

GAME has a stronger expectation for the year ahead, with Nintendo Switch, Project Scorpio and Red Dead Redemption 2 its main call outs. The firm says it will open a further 20 'Belong' stores this year, following the launch of that brand in late 2016. Belong are GAME stores that features areas dedicated to consumers coming in and paying to play titles such as Rocket League.

"We delivered a strong performance in digital and new VR technology, however our first half saw another tough period for console hardware and physical software sales in the UK, impacted by a weaker line-up of new games launches and the market-wide underperformance of certain key titles.," Gibbs said in a statement.

"Together, these dynamics resulted in a disappointing performance from our UK retail operations, however our Spanish operations and new business areas delivered further growth.

"We continue to prioritise our efforts on taking the necessary actions to respond to these challenges, whilst positioning the business to capitalise on major future market opportunities. Across the Group we are working hard to improve operational efficiencies and reduce costs whilst implementing our GAME Changing strategy to reposition and transform the business, and I am encouraged with the progress we are making.

"We have been pleased with the positive trading performance delivered in the first few weeks of the second half. Although we expect industry-wide challenges in our core Xbox and PlayStation categories to continue, we anticipate the overall UK market to remain positive during the rest of 2017, underpinned by the successful launch and continued consumer demand for the Nintendo Switch, the planned launch of Xbox Project Scorpio and a stronger slate of new titles later in the year."