War games group facing an attack on all fronts

Fantasy war games retailer Games Workshop yesterday warned on annual profits after it revealed a downturn in sales towards the end of 2010.

The company - which makes collectable figurines for Warhammer and Lord of the Rings battle games - said pre-tax profits for the year to May were likely to be below market expectations of about 17 million.

Shares slid by 13 per cent to close down 55p at 367.5p after the group posted a 4 per cent fall in the half-year to the end of November.

The figure suggested a sharp drop in sales since the company last updated the market in September. Current trading conditions mean it is unlikely to make up the shortfall over the second half of the financial year.

Julian Tolley, an analyst at HB Markets, issued a "sell" recommendation on the stock and estimated that the sales weakness might reduce profits by 10 per cent in the year.

Tolley said: "Back in September, the first-quarter update was trading in line with expectations, so the downturn has been abrupt in the second quarter and is ongoing."

The Nottingham-based company added that it continues to control its gross profit margin and costs.

The chain was established in 1975 by gaming enthusiasts from London and has some 380 stores in locations including the UK, US and Australia.

The group has eight branches in Scotland and also sells its products through a network of independent toy shops.

The majority of its models are made in Nottingham and Memphis. Games Workshop also publishes a monthly hobby magazine called White Dwarf available in five languages.

It made a pre-tax loss in 2007 after the popularity of its Lord of the Rings characters waned and it reduced the size of its store estate. But it has grown its pre-tax profits every year since then and made 16.1m in the year ending 31 May.