Profit warning at retail chain Games Digital as sales suffer

Sales of games for Xbox One and PlayStation 4 consoles rose by a fifth, but this failed to offset the steep drop for the old format games. Picture: TSPL

Sales of games for Xbox One and PlayStation 4 consoles rose by a fifth, but this failed to offset the steep drop for the old format games. Picture: TSPL

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Retailer Games Digital became an early Christmas casualty on the high street yesterday as it warned over profits after being hit by weaker-than-expected sales of computer games.

The chain, which has 321 stores in the UK and 236 outlets in Spain, said sales of old-format games for PlayStation 3 and Xbox 360 consoles plunged by 56.7 per cent in the 21 weeks to 19 December.

Sales of games for Xbox One and PlayStation 4 consoles rose by a fifth, but this failed to offset the steep drop for the old format games.

It also saw UK sales of games consoles drop 28 per cent to £98.7 million, although it said margins on these sales are low and have little impact on overall trading profits.

The group said that while this week will be its busiest in the run-up to Christmas, the “recent trends and disappointing sales since the start of school Christmas holidays”, are set to see half-year underlying earnings fall to around £30m – a drop of 30 per cent on a year earlier.

Chief executive Martyn Gibbs told investors: “The trading conditions in the UK video games market have been challenging.

“The switch over from the older gaming formats to PlayStation 4 and Xbox One software has impacted profitability across the UK market.

“The extent of the impact of this switch over has only become apparent in December, which has been compounded by lower year-on-year high street and shopping centre footfall.”

Retail experts at Liberum said the first-half sales warning comes at the “most critical time of year” for Game.

“While a decline in old format sales was expected, the scale has surprised the company while the importance of Christmas trading has hugely magnified the issue,” they added.

Game said overall sales by gross transaction value dropped 11.4 per cent in the UK over the 12-week period, despite strong Black Friday trading.

A better performance in Spain, where sales rose 8.1 per cent, helped limit the overall drop in total group sales to 6.7 per cent.

It marks the latest knock to the group in a chequered history that saw Game rescued from bankruptcy in 2012. Then called Game Group, the firm was one of the high-profile high street collapses following the financial crisis.

Administrators closed 277 of its 610 stores and it was then bought out of administration in April 2012 by OpCapita, an investment firm working for Elliott Advisors.

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