Press releases
Christmas 2010 Trading Statement
12/01/2010
The GAME Group plc (‘GAME’ or ‘the Group’) is today providing an update on its trading performance over the Christmas period and for the 49 weeks to 9 January 2010.
Sales for the 5 week period ending 9 January 2010
- Total Group sales decreased by 12.1%. Group like for like (‘lfl’) sales were down by 13.8%.
- Total sales for the UK and Ireland decreased by 18.0% with lfl sales down by 17.5%.
- Total sales for International increased by 0.9% with lfl sales down by 5.9% on a constant currency basis.
Sales for the 49 week period ending on 9 January 2010.
- Total Group sales decreased by 11.1%. Group lfl sales were down by 14.8%.
- Total sales for the UK and Ireland decreased by 15.1% with lfl sales down by 16.8%.
- Total sales for International decreased by 1.3% with lfl sales down by 10.2% on a constant currency basis.
Commenting on the announcement Peter Lewis, Chairman said:
“The negative trends in the pc and video games market, outlined in our previous trading statement, continued over the key Christmas selling period despite strong software releases and a sizeable installed base of hardware. This, combined with the strong comparative period and the impact of customers shopping later, resulted in like for like sales declines of 13.8% for the Group over the last five weeks. Since Christmas, however, we have seen significant improvement as customers have responded well to our mint and preowned sales offers and the release of new software.
We now expect the Group profit before non-recurring costs and tax for the full year to 31 January 2010 to be between £87m and £93m. This will be the second best profit performance in the Group’s history (2009: £126.2m; 2008: £75.5m), although it is below market expectations.
In 2010/11 we expect the video games market to continue moving towards higher margin software and new peripheral technology, to supply an unprecedented installed base of consoles in the market. The Board remains mindful of the uncertain macro-economic environment and the trends in the pc and video games market. This combination of factors means that revenues are likely to decline year on year but our sales mix will continue to move towards higher margin new and preowned products.
We anticipate that the new technology in 2010/11 will lead to increased consumer choice and benefit GAME as customers seek expert advice and specialist service. We believe that this, together with additional hardware pricing activity, will continue to stimulate the market before we transition to the next growth phase of the video games market and our business."
Trading update
The negative trends in the pc and video games market, outlined in our previous trading statement, continued over the key Christmas selling period despite strong software releases and a sizeable installed base of hardware. This, combined with the strong comparative period and the impact of customers shopping later, resulted in like for like sales declines of 13.8% for the Group over the last five weeks. Since Christmas, however, we have seen significant improvement as customers have responded well to our mint and preowned sales offers and the release of new software.
In the UK, the pc and video games market declined by 24%1 in 2009 compared to a prior year that enjoyed unprecedented demand for hardware and exceptional launches of new peripherals and software. Much of the decline is due to a fall in revenues from the Nintendo formats. The International markets in which we operate have seen similar declines, although the impact from the Nintendo formats has been less significant.
In an extremely challenging market, the Group has delivered a resilient performance. This is a testament to our specialist proposition, which delivers a market leading multi channel offer for our customers. This includes competitively priced bundle deals, exclusive products, compelling trade-in offers and a value driven preowned programme, all supported by our exceptional teams and Reward Card.
Preowned, in particular, has continued to perform well for us in every territory, showing year on year growth over the Christmas period with more customers recognising the value for money that it provides.
The increased participation of preowned in the sales mix has, as anticipated, increased our gross margin year on year. However, this has been partially offset by the console bundle deals we introduced to drive revenues through December in a very competitive market. We therefore expect our full year gross margin to be around the lower end of our previous guidance of an improvement of 170 to 220 basis points on last year.
Throughout the year we have maintained strong cost control disciplines and have delivered the additional £6m of synergies outlined in previous guidance.
We now expect the Group profit before non-recurring costs and tax for the full year to 31 January 2010 to be between £87m and £93m. This will be the second best profit performance in the Group’s history (2009: £126.2m; 2008: £75.5m), although it is below market expectations.
Outlook for 2010/11 financial year
In 2010/11 we expect the video games market to continue moving towards higher margin software and new peripheral technology, to supply an unprecedented installed base of consoles in the market (28.5m units in the UK alone, compared to 22.0m units in January 2009).2 The Board remains mindful of the uncertain macro-economic environment and the trends in the pc and video games market. This combination of factors means that revenues are likely to decline year on year but our sales mix will continue to move towards higher margin new and preowned products.
There is a strong schedule of new releases in the first half including Mass Effect 2 from EA, Splinter Cell: Conviction from Ubisoft, Bioshock 2 from Take Two, and God of War 3 from Sony. Microsoft and Sony have announced that they will each launch new motion sensing technology, with Microsoft recently confirming that Project Natal for the Xbox360 will launch this November. We also expect further manufacturer pricing and promotional activity supported by strong software launches throughout the course of the year.
We anticipate that the new technology in 2010/11 will lead to increased consumer choice and benefit GAME as customers seek expert advice and specialist service. We believe that this, together with additional hardware pricing activity, will continue to stimulate the market before we transition to the next growth phase of the video games market and our business.
We continue to invest in our multi-channel offer. We believe that in the future, a leading brand proposition must encompass stores, e-commerce and digital distribution. Our aim is to be at the forefront of this evolutionary process. We will provide further details of our plans with our full year results in April.
We will continue to exercise strong cost control disciplines with effective management of the portfolio and infrastructure. The Group has a strong balance sheet, with net cash as at 31 January 2010 expected to represent an increase on the prior year. We expect capital expenditure in the 2010/11 year to be in the region of £20 to £25 million (2009/10 estimate £32m).
The GAME Group plc will report its results for the 12 months to 31January on 21 April 2010.
1 Source: GfK ChartTrack UK Panel 25/1/09 to 2/1/10
2 Source: GfK ChartTrack
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Notes:
Store portfolio
| 9 January 2010 | 5 December 2009 | 31 January 2009 | |
| Number | Number | Number | |
| Company owned and concessions | |||
|---|---|---|---|
| UK and Ireland: - GAME – Stores - GAME - Concessions - Gamestation |
392 33 257 |
392 52 257 |
391 52 253 |
| Total UK and Ireland | 682 | 701 | 696 |
| France | 199 | 199 | 192 |
| Iberia | 286 | 285 | 258 |
| Scandinavia | 68 | 68 | 66 |
| Czech Republic | 30 | 30 | 22 |
| Total Continental Europe | 583 | 582 | 538 |
| Australia | 118 | 117 | 101 |
| Total International | 701 | 699 | 639 |
| Total owned and concessions | 1,383 | 1.400 | 1,335 |
| Franchises | |||
| France | 0 | 0 | 1 |
| Iberia | 5 | 5 | 5 |
| Australia | 1 | 1 | 1 |
| Czech Republic | 0 | 0 | 0 |
| Total franchises | 6 | 6 | 7 |
| Total operational outlets | 1,389 | 1,406 | 1,342 |
Enquiries:
| GAME Group plc | Lisa Morgan, Chief Executive Ben White, Group Finance Director Simon Soffe, Investor Relations Director |
+44 1256 784566 |
| Brunswick | Jonathan Glass Wendel Verbeek Oliver Hughes |
+44 207 404 5959 |
