Yahoo Finance Poor Pre-Christmas Sales Spark Game Slump
Shares (Berlin: DI6.BE - news) in video games retailer Game Digital (LSE: GMD.L - news) plunged 40% after it said sales had slumped and the start of the school Christmas holidays had failed to spark a revival in its fortunes.
The grim pre-Christmas trading update prompted Game to issue its second profit warning this year and the stock to slump to well below its offer price when the company went public last year.
It (Other OTC: ITGL - news) was squeezed by a slower-than-expected switch to games for new Xbox One and PlayStation 4 formats while at the same time the market for old format games was declining more quickly than had been anticipated. UK sales of consoles were down 28.3%.
Game also said the lower number of shopping trips to high streets and shopping centres this month had taken its toll.
The group said underlying earnings for the 26 weeks to 23 January were expected to fall to £30m from £43m for the same period last year. It said total sales for the UK video games market in the 21 weeks to 19 December were down 13.5%.
Sales of Xbox One and PlayStation 4 software were up 20% to £19m but this was not enough to offset the 57% decline in Xbox 360 and PlayStation 3 content to £23.4m.
Game said the next few days "will represent the busiest trading period for the group". But it said that "given the recent trends and disappointing sales since the start of the school Christmas holidays" it was revising its earnings outlook.
Chief executive Martyn Gibbs said: "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."
Analysts at Canaccord Genuity (Other OTC: CCORF - news) said: "Game is just heading into its peak sales period, so this is a particularly disappointing update."
Game had previously issued a profits warning in January citing heavy competition over the previous Christmas period and the impact of deals bundling games with consoles (Other OTC: UBGXF - news) .
