Game Group struggles against poor Christmas sales

Published:  12 Jan at 9 AM

Game Group, the high street video games retailer, has announced that poorer than expected trading over the Christmas period could see the firm breaching the terms of its loan agreements. The news saw share prices drop by a third.

The British-based group, which operates in Australia as well as in nine European territories, has around 1,300 outlets,and has been finding it increasingly difficult to compete with the trend for online gaming. It has initiated a store closure programme in order to avoid the fate of similar specialist retailers including HMV, the music and DVD seller.

Over the last two months, the company has seen sales decline by 14.7 per cent compared to the same period in 2010. On November 16, Game predicted that sales would drop by around seven per cent, but has now revised that figure to a fall of 10.3 per cent.

Christmas sales promotions have also hit the firm’s profitability, and it warned that although loan covenants had not yet been breached, it may not be compliant with agreements on 27 February when they are due to be tested. Game added that it was giving regular updates to lenders who it claims are remaining supportive.

Philip Dorgan, an analyst with Panmure Gordon, estimated that poor sales figures meant that the company was headed for a £30 million full-year loss. Although Nintendo is due to launch its Wii U later this year, and PlayStation is to bring out its Vita in February, Dorgan believes that Game will still struggle to compete against online operators and the supermarkets.

Major supermarkets often launch new blockbusters as loss leaders. In a report by Reuters, Ian Shepherd, CEO of Game Group, said the firm would continue to look at new strategies for adapting to a constantly changing market.