Profits warning from retailer
Game plunges after switch of gaming products
Video games retailer Game Digital has reported disappointing sales since the start of the school Christmas holidays, prompting a collapse in its shares.
Sales fell by 13.5% during the 21-week period ending 19 December. It warned that adjusted underlying earnings will fall from £43 million to about £30m for the first half ending 23 January. Shares in the company fell by up to 42% to 120p, below the 200p price at flotation last year.
The company blamed a faster than expected decline in the market for old format content as well as a slower than anticipated switch to new format content such as Xbox One and PlayStation 4.
Martyn Gibbs, chief executive, said: “The trading conditions in the UK video games market have been challenging. The switch over from the older gaming formats to PlayStation 4 and Xbox One software has impacted profitability across the UK market. The extent of the impact of this switch over has only become apparent in December which has been compounded by lower year on year high street and shopping centre footfall.
“We remain committed to our strategy of building “the most valuable community of gamers”.
“Despite the market challenges, Game has continued to deliver significant growth from new format content and newer categories such as licensed merchandise and preowned mobile phones and tablets, and we continue to prioritise these areas as well as growing our Multiplay business.
“Whilst we are pleased with strong growth in our newer products, this has not been sufficient to offset the margin decline from sales of Xbox 360 and PlayStation 3 content and other old format software.
“The pre-Christmas period and the winter sale are very important to our customers and with market leading offers we remain well prepared in our stores and online for the remaining peak trading period.”
Canaccord Genuity cut its target price on the stock from 270p to 183p.