Press releases
Interim Management Statement to Saturday 8 December 2007
11/12/2007
Peter Lewis, the Chairman of GAME, a leading European retailer of PC and video games products, has today made the following statement.
Trading Update
“GAME continues to experience strong growth within an expanding market.
For the 45 weeks to 8 December 2007, total Group sales (including Gamestation from 2 May 2007) were up by 89.1%. Like for like (lfl) Group sales (note 1) for the same period were up by 44.1%.
In the UK and Ireland, total sales were up by 92.3% and lfl sales were up by 46.1%. In our International business, total sales and lfl sales were up by 80.0% and 38.2%, respectively.
This exceptional sales growth reflects strong consumer demand for all product formats, particularly so for the Nintendo DS Lite and Wii console. The UK trading environment continues to be very competitive with retailers expanding their PC and video games offer to capitalise on the growing market.
As we said in September, the higher volumes and value of new generation platforms will increase the hardware share of total sales for the year to January 2008. The substantially lower margins achieved on hardware, compared to software, and lower margins from Gamestation will reduce our overall gross margin. Taken together, the Board is of the view that gross margin for the full year will be around 275 to 325 basis points lower than last year (note 2).
Store openings and capital expenditure
Our portfolio has increased by 333 stores in the year to date and we will operate over 1,150 stores (note 3) through the key Christmas trading period.
Capital expenditure (excluding the acquisition of Gamestation) in the year to 31 January 2008 will be in the region of £40m. This is ahead of our previous guidance and reflects our accelerated store opening programme plus additional expenditure on Information Technology for our stores and website ahead of our biggest ever Christmas.
Gamestation
On 2 May 2007, the Group acquired Gamestation, a UK specialist retailer of PC and video gaming products employing over 1,800 staff across 217 stores. Gamestation appeals to the core gamer and is complementary to GAME’s broader mass market offer.
The Office of Fair Trading reviewed our acquisition of Gamestation and, on 9 August 2007, decided to refer the acquisition to the Competition Commission.
On 5 December the Competition Commission announced that the acquisition had received provisional clearance. The inquiry is scheduled to be completed by the end of January 2008. In the interim, Gamestation will continue to operate under ‘hold separate’ undertakings that GAME has previously agreed with the Competition Commission.
The costs to the Group of complying with the requirements of the inquiry are anticipated to be around £4.5m in total which will be non-recurring.
The enlarged Group will continue to operate both the GAME and Gamestation formats, using its knowledge of the customer base currently served by each brand. There are expected to be good opportunities to improve the efficiency of the acquired operations through integration with the existing infrastructure and facilities of the GAME Group.
As previously announced, the Board anticipates realising pre-tax synergies of approximately £7m per annum by the second full year following completion.
In addition to the costs of complying with the Inquiry, there will be a non-recurring charge of approximately £5m related to integrating the acquisition, of which £3.5m is expected to be incurred in the current year, ending 31 January 2008, and the balance in the following year. In addition, there will be capital expenditure on IT and distribution infrastructure in relation to the integration of around £3m.
Outlook
We are very pleased with our performance for the year to date and we look forward to the key Christmas trading season. There is an unprecedented range of products for our customers albeit we anticipate that demand will outstrip supply particularly for the Nintendo Wii format. However, the Board remains confident of a successful outcome to the year.
The Group will remain in a Closed Period until Tuesday 15 January 2008 when it will report sales for the key Christmas trading period.”
Note:
- Gamestation was acquired on 2 May 2007 and is excluded from all lfl sales calculations
- Group gross margin for 12 months to 31 January 2007 was 27.2%
- Store portfolio
| As at | 8 December 2007 Number |
31 July 2007 Number |
31 January 2007 Number |
|---|---|---|---|
| Company owned and concessions | |||
| UK and Ireland | |||
| - GAME | 414 | 410 | 407 |
| - Gamestation | 237 | 223 | - |
| 651 | 633 | 407 | |
| France | 167 | 161 | 130 |
| Scandinavia | 62 | 61 | 64 |
| Iberia | 203 | 183 | 165 |
| Continental Europe | 432 | 405 | 359 |
| Australia | 45 | 22 | 16 |
| International | 477 | 427 | 375 |
| Total owned and concessions | 1,128 | 1,060 | 782 |
| Franchises | |||
| France | 7 | 7 | 11 |
| Iberia | 11 | 12 | 18 |
| Australia | 4 | 5 | 6 |
| Total franchises | 22 | 24 | 35 |
| Total operational outlets | 1,150 | 1,084 | 817 |
Enquiries:
| The GAME Group plc: Lisa Morgan, Group Chief Executive David Thomas, Deputy Chief Executive and Group Finance Director Simon Soffe, Head of Investor Relations and Group Communications |
+44 (0)1256 784566 |
| Brunswick: Jonathan Glass Wendel Verbeek Ash Spiegelberg: |
+44 (0)20 7404 5959 |
