GAME posts full-year loss due to 'volatile' retail market
But things are looking up so far in this financial year
GAME has posted a full-year pre-tax loss of £10m for the year ending July 29th.
That's compared to a 1.1m profit in the previous year.
It follows a challenging 12 months for the retail chain, impacted by the growth of downloading, costs incurred by its esports investment, and the poor performance of key products such as Call of Duty: Infinite Warfare.
Revenue reached £782.9m for the period, a drop of 3.6% year-on-year, with gross profit down 5.7% to £205.1m.
The fall was the result of a particularly challenging UK retail market. The first half of its last financial year, which included Christmas 2016, featured fewer games than the prior year, while titles such as Call of Duty failed to deliver the typically strong performance that GAME had expected.
Its Spanish business, meanwhile, remains strong, with GTV up 22.5%. The firm has also seen growth in its digital and events business (GTV up 116.4%), although it made a larger £6m loss due to continued investment in this area.
The firm says it is disappointed in the results, but satisfied with the progress of its strategic plan, which includes the roll-out of new Belong stores. The Belong stores are areas within GAME where players can pay to compete with one another on high-end PCs. It currently has 18 Belong stores, and says there will be 35 by the end of next year. That may even include standalone Belong outlets.
The firm reiterates that it has many lease events coming up - 221 by the end of 2018 - where it will look to renegotiate its rents. The firm has reduced its UK store count from 313 to 304 in the last year - it had opened 11 new stores and closed 20. There were 8 loss-making stores in the UK during its last financial year (up from 1 in the previous year). These are being addressed either via new rent agreements or the closure of these outlets, the firm states.
Its Spanish store count increased from 267 to 268.
In terms of its strategic areas, events and esports [part of its Multiplay division] is the main focus, with the firm confirming its plan to sell Multiplay's Digital operations so it can focus on the aforementioned events and esports.
Despite disappointing results, GAME is optimistic over the recent performance of Xbox One X, Nintendo Switch and Call of Duty: WWII. Indeed, the hardware and software market is now showing signs of uplift in the UK.
"Though our markets remained volatile last year, we made solid strategic progress as we continued to focus on those elements within our control; delivering on each of the four pillars of our strategy and creating a new cost base for our UK retail business," CEO Martyn Gibbs said in a statement.
"We have now opened 18 Belong venues, and we have seen encouraging early performance. We have reviewed our operations and are now accelerating development plans as we seek to fully capitalise on the strong growth potential in the growing esports market.
"After two years of declines, our core UK console market returned to growth in the second half of our financial year on the back of the launch of the Nintendo Switch. This growth has continued into our new financial year in both of our key territories. Whilst we remain mindful of the structural headwinds that remain in our core markets, we expect recent positive market dynamics to continue into our peak Christmas trading period, driven by strong growth in all elements of the PlayStation 4 category, continued customer demand for the Nintendo Switch, the launch of Microsoft's Xbox One X and continued stronger demand for related software.
"Against this market backdrop, our priorities remain unchanged. Across the Group we are focused on maximising the opportunities from our core retail markets by delivering a compelling and constantly improving customer proposition, realising further operational efficiencies and driving the continued transformation of the business, as we transition our business from a leading retailer of boxed products to a leading provider of physical and digital gaming products, services and experiences."