Game reports sales downturn

Computer games retailer Game today revealed its like-for-like sales had gone into reverse despite the buzz created by a new handheld console from Nintendo.

Game said tough trading conditions featuring cheaper software and a lack of blockbuster games releases were behind a 2.6% decline in same-store sales across its portfolio of outlets in Ireland, the UK and Europe.

It marked a significant slowdown on the progress seen in the first 11 weeks of its financial year when the March debut of the Nintendo DS console was credited with driving like-for-like sales 8% higher.

The Nintendo DS has dual screens, incorporates touch and wireless technology and has the ability to recognise users’ voices.

Game said the success of the Nintendo DS had mitigated the challenging trading environment, but its gross margin for the first half was still likely to be as much as 125 basis points lower than the same stage of last year.

Problems were greatest in the UK and Ireland, where Game has around 400 stores, with like-for-like sales 5.4% worse off in the period despite total demand rising 0.5%.

In contrast, same-store sales in continental Europe were up by 12% and total sales were ahead by 37.2%.

Game said the scheduled launch of the new handheld PSP by electronics giant Sony in September would benefit its second half, while the Xbox 360 and PlayStation 3 were expected to make a significant contribution when they are released next year.

Despite the difficult trading environment, Game vowed to stick with its expansion programme which involves opening 80 stores this year, lifting its portfolio beyond 700 branches in time for Christmas.

Evolution Securities analyst Nick Bubb said trading since Easter was expected to be tough, but the extent of the like-for-like sales decline in the UK was far worse than feared.

Losses of around £5m (€7.3m) have been pencilled in for the first half of the financial year and Mr Bubb said his full-year forecasts of £29.5m (€43.4m) were dependent on Game getting its full allocation of Sony PSP consoles at Christmas.

Mr Bubb said: “The outlook for 2006 remains good in theory but other retailers want a piece of the action as well, like HMV.”

In its trading statement today, Game added that it had settled a legal dispute arising from its acquisition of ABC Games International in 2001.

Although it felt the claim had little merit, the company feared its reputation could be damaged and agreed to settle for €3.1m.