Shares in Game Digital flopped over three per cent this morning after the firm revealed "tough" trading in the UK had hit sales.
Like many other retailers, Game focuses on its gross transactional value (GTV): effectively the value of sales before any discounts are applied.
Reporting its half-year numbers to the end of December, Game said group GTV growth had dropped by 6.3 per cent.
Perhaps more concerning for the retailer was that UK GTV fell by 18.3 per cent over the first six months of the year. The firm also has outlets in Spain and these continued where they had left off in previous periods, with growth of 8.5 per cent in local currency terms – a 29 per cent increase once the weakening of the pound had been taken into account.
Net cash reserves totalled £68m at the end of the year, meaning the firm had burnt through over a third of its cash during the year.
Why it's interesting
Since its return as a listed firm, Game has battled against a challenging retail market. The fall in sales was well sign-posted, with revenues in line with expectations.
18 January 2017 @ 10:30amGame Digital (GMD)
The firm is investing in gaming arenas – in an attempt to capitalise on the social side of things, meanwhile it cut costs across the group by £5m during the first half-year.
Analysts at Canaccord Genuity called the Christmas numbers "robust" but they added: "This masked a weaker performance by the UK".
What the company said
Chief exec Martyn Gibbs said:
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.
Overall demand for new games released in the period was lower than expected but we were pleased with the Group's performance over the peak weeks of Black Friday and Christmas, with GTV excluding lower margin hardware sales up two per cent 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.