Game sales hit by shortage of consoles

Computer games retailer Game today said underlying sales in the UK fell 20.4% over Christmas after an “unprecedented breakdown” in the supply of PlayStation 2 consoles.

Computer games retailer Game today said underlying sales in the UK fell 20.4% over Christmas after an “unprecedented breakdown” in the supply of PlayStation 2 consoles.

Game, which has 398 stores in the UK and 224 more worldwide, was forced to trade for more than half the run-up to Christmas with no PS2 consoles in its stores.

But its shares rose 8% today as investors expressed relief that the sales drop was not worse and that a rapid change in Game’s trading strategy had worked.

Chief executive Martin Long said: “We had customers calling us daily to find out the latest position on hardware and checking the messages that we put on our website. When we got deliveries (of PS2) we were selling out within one or two days.”

He estimated that the group lost “tens of millions” of revenues from the shortage of PS2 consoles, with sales of accessories such as memory cards also lower.

Executives reacted by launching a string of promotional offers on software titles, such as multi-buy deals involving new titles such as GTA: San Andreas.

Alternative hardware such as the Xbox Crystal console and the Game Cube and Gameboy Advance SP from Nintendo were also pushed to the front of stores.

In a trading statement, Game said total sales in the UK and Ireland were 15.1% lower during the six weeks to January 8 and down 9.1% over the 49 weeks to the same date.

A positive performance from its stores in continental Europe where same-store sales rose 2.7% helped to limit the decline in group underlying sales to 17.1% over Christmas.

But a strong third quarter meant it expected to post full-year profits in the region of £32.2m (€46m) – in line with the market consensus that emerged once Sony flagged the supply problems of PS2 in early November.

A tight grip on costs and the amended trading strategy helped to drive margins, which were expected by Game to be higher than a year earlier.

Evolution Securities analyst Assad Malic noted the rise in Game shares today and said: “The share price bounce is more relief that it’s not been a complete disaster.”

Game reported that group like-for-like sales in the quarter to October 30 were ahead by 2.1% following strong demand for new software releases and lower prices of consoles such as the Xbox.

More than a million copies of GTA: San Andreas were sold in the UK by computer games retailers, with Halo 2 also setting sales records.

Altium Securities analyst David O'Brien said Game had performed ``very credibly over a difficult period owing to circumstances beyond its control''.

“We are most impressed by the containment of operating costs, although we are not too surprised by the improvement in gross margin in view of the higher proportion of software sales,” he said.

Game said it remained confident in its medium-term prospects and looked forward to the launch of the new Sony PSP and Nintendo DS hand-held products in the first half of 2005.

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