GAME growth held back by low margin hardware

GAME’s annual general meeting today came with an update on trading from the back-end of last year. The headlines are huge growth in its Events, eSports and Digital categories, but overall transactions were down, due to reduced margins on hardware.

For the 23 weeks up to January 7th, the group were 6.3% down year-on-year in terms of its GTV (gross transactional value). Take out the dip associated with lower-cost hardware however and GAME made a small gain of 0.7%. Looking just at the critical three weeks around Christmas and a 1.6% fall in GTV turned into a 2% rise once that same hardware had been removed from the figures.

Console prices fell and old hardware was cleared out to make room from new, slimmer models last year. All those consoles should of course benefit the business in 2017 as customers come back for more games. Areas to see growth included digital content, PC gaming accessories and VR headsets, which were up 31% across the 23-week period.

The report had some bad news from GAME’s UK stores, with retail posting an 18.3% decline in GTV over the 23 weeks to 7th of Jan. It noted that some strong releases, such as Pokemon Sun and Moon, were overshadowed by ‘weaker overall year on year performance … from new titles released in the period.’

Martyn Gibbs, CEO of GAME commented: "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 2% 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."