Low-margin consoles push GAME Digital Christmas lower

18th Jan 2017 12:42

(ShareCast News) - GAME Digital updated the market on trading ahead of its annual general meeting on Wednesday morning, with group gross transaction value over the peak Christmas trading weeks down 1.6%.The London-listed firm said over the first 23 trading weeks of the year to 7 January 2017, gross transaction value declined 6.3%.Excluding lower margin hardware, group GTV rose 2.0% in the key three week Christmas trading period, however, with GTV up 0.7% over the 23 week period.That strong underlying growth was achieved in the group's new retail categories, including digital content, PC gaming accessories and virtual reality headsets, with GTV up 31% in the 23 week period.The first seven in-store gaming arenas were successfully launched in the UK under the group's new 'BELONG' brand, with encouraging early results across pay to play gaming, VR and PC category sales, the board reported.Plans were underway to extend the roll out of 'BELONG', with up to a further 20 in-store gaming arenas to be opened during the second half.Incremental costs of up to £2m are anticipated in the second half to support the openings, including pre-opening disruption and central costs, plus additional marketing support.Consistent with its plans, GAME said it expects to realise core operational efficiencies and cost savings of over £5m in the first half across its UK retail operations.The board also reported continued strong liquidity, with group cash - net of overdrafts - on 7 January of £68m, down from £105m a year earlier, with access to aggregated facilities of approximately £100m across the UK and Spain, which was up from £60m.Strong customer pre-orders were building for the forthcoming Nintendo Switch console, launching on 3 March in both territories, GAME said."I would like to thank our 5,000 colleagues across the UK and Spain, for their continued hard work and dedication at our busiest time of year as well as our supplier partners for their ongoing support in helping us to deliver the ultimate specialist gaming proposition for our customers and gaming communities," said CEO Martyn Gibbs."Trading conditions in the UK video games market remain tough, with lower console sales, and we continue to take appropriate actions to respond to these market dynamics and to reposition and transform the business."Gibbs said overall demand for new games released in the period was lower than expected but the board was pleased with performance over the peak weeks of Black Friday and Christmas, with GTV excluding lower margin hardware sales up 2% year on year."Furthermore, over the period we continued to deliver significant operational efficiencies and cost savings whilst achieving strong growth in our new retail categories and new businesses."We remain focused on achieving further progress against these key strategic priorities in the year ahead."Gibbs added the board was pleased with the customer reaction and initial performance of the new in-store gaming arenas, under the 'BELONG' brand."We have also continued to see the broadening of our partner base and growing support for this strategic initiative."As a result, we have taken the decision to extend the roll out of this exciting new proposition, ensuring that we can bring the opportunity to play, experience and compete through us, both in store and online, to as many gaming fans as possible."Looking ahead, Gibbs said he was encouraged by the strong consumer anticipation which was building for the launch of the Nintendo Switch console in March, and beyond that to the launch of Xbox's Project Scorpio later in the year."We expect these new consoles to drive interest and activity in our core console markets, as well as open up new growth opportunities for our business."