Game Digital share price rockets after Mike Ashley-backed firm cuts costs

 
Oliver Gill
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Game Digital revealed earlier this year it was struggling to get its hands on Nintendo Switch consoles (Source: Getty)

Shares in troubled retailer Game Digital rocketed this morning despite the firm revealing that it's struggling to keep pace with a second-half surge in UK gaming sales.

The Mike Ashley-backed firm said full year sales to July 2017 in Britain fell by 12.1 per cent compared with the wider sector shrinking by 6.8 per cent.

Over the last six months, the UK retail gaming market has grown by 8.8 per cent. Game sales fell by 1.3 per cent over the same period.

Shares were up almost 20 per cent minutes after the markets opened.

The launch of the Nintendo Switch earlier this year has provided UK gaming retailers with a boost. But Game revealed in June it was struggling with supplier problems and was not able to get hold of as many consoles as it would like.

However, investors were buoyed that corporate turnaround initiatives were starting to bear fruit. Game announced it expects to deliver £5m of cost reductions over the year, though some of this will be offset by rising staff costs.

Read more: Sports Direct’s Mike Ashley buys Game Digital stake after profit warning

In July, Sports Direct owner Mike Ashley added a 26 per cent stake in Game to his portfolio of retail interests.

Chief executive Martyn Gibbs said:

Game has made further progress in the second half of the year as we continue to focus on developing our strategic initiatives whilst creating a new cost base for our UK retail business to address the challenges in the UK console market.

Spain

Game also operates in Spain and has just about kept up with its rapidly expanding market. Sales for the year in the country were up 23.1 per cent, slightly behind sector growth of 26.4 per cent.

The positive performance in Spain helped group sales rise in the second half from £304.6m to £325.4m. Over the year, group sales fell to £891.7m from £912.6m.

Gibbs added: "We have been encouraged by the recent growth in both the UK and Spanish markets overall and we expect that this momentum will continue into peak trading driven by the benefits of continued customer demand for the Nintendo Switch, the launch of Microsoft's Xbox One X and a strong line up of new games releases."

Read more: Switched off: Game Digital shares tank on Nintendo supply problems

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