GAME shares recover as full year profits rise

Shares in the UK's leading videogames retail chain, GAME Group, have bounced back sharply from yesterday's price drop after the company announced a 31 per cent rise in pre-tax profits for the full year to January 31st.

The firm's share price dropped by some 21 per cent yesterday after it revealed that talks with a potential buyer had ended, but today's financials caused a rally of around 14 per cent for the stock.

The company reported pre-tax profit of £31.9 million, up 31 per cent on the previous year's figures, but group turnover was down by five per cent to £576.6 million, representing a fall in like for like sales of 12.5 per cent.

A particularly positive note came from the company's rapidly expanding business in continental Europe, which reported a profit for the first time - well ahead of the group's planned schedule in the region.

The group's strong performance comes despite the difficult situation before Christmas, when supplies of PlayStation 2 hardware broke down, leaving most retailers without any stock of their most popular product.

"This was a resolute performance particularly in light of a breakdown in console hardware supplies through the key Christmas period and the consequent disruption to our customer flows," commented group chairman Peter Lewis.

"Achieving profitability in Continental Europe earlier than expected is particularly pleasing," he continued. "This year, Nintendo DS and Sony PSP will help bridge the console generation gap. In 2006, we expect the eagerly awaited PS3 and Xbox2 to stimulate strong demand for our product."

GAME expects the PlayStation Portable to launch in the second half of its 2005 fiscal year - a period which runs from the beginning of August onwards. The company noted that thanks to the successful launch of the DS, the first few weeks of 2005 have been a resounding success - in the first 11 weeks, sales are up 18.1 per cent overall, with like for like sales up 8 per cent.

Despite the strong results, GAME can expect to face major challenges in the coming years, not least due to yesterday's announcement of a merger between US giants GameStop and Electronics Boutique. That deal will create a specialist retail giant with 3,800 stores worldwide, and with 3,200 of those in the United States, it's expected that it will look to Europe for much of its future growth.