GAME had a tough Christmas.
The High Street video games retailer put out a profit warning just days before Christmas, blaming a slump in the UK video games market and saying there’s been an “unexpectedly steep decline in Xbox 360 and PlayStation 3 content sales.”
On Wednesday GAME put out another trading statement to coincide with its annual general meeting with shareholders. It shows sales improving, but not enough.
Gross transaction volume in the 3 weeks to 9 January fell by just 0.4%, compared to a 6.7% slump at the last update. But within that, the UK business is still freefalling — UK sales fell 5.9% and were only propped up by a 10.6% rise in Spain. GAME’s gross transaction value across the group is down by 5.5% in the 24 weeks to 9 January.
It looks like GAME is now planning to cut costs and possibly jobs. CEO Martyn Gibbs says in today’s update (emphasis ours):
As outlined in our previous trading update, recent trading conditions in the UK video games market have been challenging, impacting GAME UK’s peak trading performance. However, we have seen a better market and an improved sales trend over the last three weeks. The strong performance in Spain in the first 21 weeks of the year has also continued over our most recent trading period.
We are committed to taking appropriate actions to respond to the market challenges that we face in the UK market. Alongside pursuing commercial developments we are focused on driving further operational efficiencies and the Group has already begun to implement a series of initiatives to deliver an improvement in the profitability of our UK business.
But as well as cutting back, GAME is hoping to see an uptick in sales and touting a new product category as a potential game changer — virtual reality headsets.
Gibbs says (emphasis ours):
Looking forward, we see a solid schedule of new games releases planned during the second half of our financial year. We also anticipate that new technology releases this year, in particular the launch of Virtual Reality devices, will lead to increased consumer interest which will benefit GAME as customers seek expert advice and specialist service. We believe that these factors, together with the continued move towards high margin new format mint and preowned software and accessories and a growing contribution from the Group’s newer categories and businesses, including GAMEtronics and Multiplay, will support margin growth in our second half and beyond.
A host of virtual reality headsets are set to launch this year, with the most prominent among them the Oculus Rift. The headset will launch on March 28 in the US and cost $ 600 — almost double what consoles like the Xbox One and PS4 currently cost.
Demand appears to be high, with the pre-order website crashing amid heavy demand. The Oculus comes with two games — “Lucky’s Tale” and the space dogfighting game “Eve: Valkyrie” — but you need a high-spec computer to be able to run the thing.
NOW WATCH: Everyday phrases that even smart people say incorrectly