UK and European specialist retailer GAME has announced its financial results for the full year ended January 31st, revealing a massive drop in profits, despite a positive boost in turnover towards the end of 2005.
Citing the now somewhat over-used rationale of a "difficult transitional period," the company revealed pre-tax profits of just GBP 8.4 million, compared to GBP 29 million a year ago.
The company did end the year on a more positive note, showing an increase in turnover from GBP 5.76 million to GBP 645.1 million, helped largely by the introduction of Microsoft's Xbox 360 and strong sales of both the PSP and Nintendo DS.
Game blames the loss in profits on "cyclical deflation in software selling prices, pricing pressure on older formats and the increased proportion of hardware in the sales mix."
GAME Group chairman, Peter Lewis, commented: "This was an immensely difficult transitional year and it is disappointing to report such a sharp drop in profits. Our comparatively strong sales performance is testimony to our ability to address competitive threats to our specialist business model."
"We expect the UK market to continue to be very competitive during 2006, particularly on older formats," Lewis added. "However, our proposition to consumers comprises a unique package of wide product range, pre-order facilities, pre-owned trade-in programme, special promotions and a reward card that now has more than seven million members."
The group operates 700 stores in six countries and is expected to open between 70 and 80 owned stores in 2006/2007, of which around 60 will be in Continental Europe.
Lewis maintains that the group is "well placed to benefit from the resultant increase in demand" following the expected launch of the Nintendo Revolution around October and Sony's PS3 launch in November, adding that "the Board is confident of a significantly improved performance this year and beyond."