Video game retailer Game Digital became an early Christmas casualty on the high street as it warned over profits after being hit by weaker-than-expected sales of computer games.
Game warned on first-half profit, citing challenging trading conditions and disappointing sales since the start of school Christmas holidays.
The company, which has 321 stores in the UK and 236 outlets in Spain, expects adjusted earnings before interest, tax, depreciation and amortisation to drop to about £30m for the 26 weeks ending January 23.
Game reported adjusted core earnings of £43m last year. Total group gross transaction value was down 6.7 per cent to £466.8m.
While the business traded well through Black Friday, December has seen very poor sales, in the UK, in old format games. Total sales in the video games market were down 13.5 per cent on the prior year with GAME down 11.4 per cent.
Martyn Gibbs, chief executive officer of Game Digital, said: “The trading conditions in the UK video games market have been challenging. The switch over from the older gaming formats to PlayStation 4 and Xbox One software has impacted profitability across the UK market.
“The extent of the impact of this switch over has only become apparent in December which has been compounded by lower year-on-year high street and shopping centre footfall.”
But Mr Gibbs said that GAME Retail UK has recruited a significant numbers of new customers through sales of hardware and content.
He added: “Despite the market challenges, GAME has continued to deliver significant growth from new format content and newer categories such as licensed merchandise and preowned mobile phones and tablets, and we continue to prioritise these areas as well as growing our Multiplay business.
“Whilst we are pleased with strong growth in our newer products, this has not been sufficient to offset the margin decline from sales of Xbox 360 and PlayStation 3 content and other old format software.”
The trading conditions in the UK video games market have been challenging.Martyn Gibbs, chief executive officer of GAME Digital.
The next few days will represent the busiest trading period for the Group.
“The pre-Christmas period and the winter sale are very important to our customers and with market leading offers we remain well prepared in our stores and online for the remaining peak trading period,” said Mr Gibbs.
Retail experts at Liberum said: “Footfall is down in stores, as is the case with retail across the UK with shopping centres reporting a decline in customer numbers, but while there is increased participation online we do not believe that this is an issue of disintermediation.”
The Spanish market remains strong for Game, where the slow down in old format content sales has not affected the market, with gross transaction value up 8.1 per cent.
Shares in Game, which floated in June last year, plunged more than 40 per cent at one stage after the profit warning. Despite assurances from the group that it is still hoping for a stronger second half of its financial year, with sales of software for Xbox One and PlayStation 4 expected to pick up, helped as well by sales of second-hand mobile phones and tablets.
It marks the latest knock to the group in a chequered history that saw Game rescued from bankruptcy in 2012. Then called Game Group, the firm was one of the high-profile high street collapses following the financial crisis.
Administrators closed 277 of its 610 stores and it was then bought out of administration in April 2012 by OpCapita, an investment firm working for Elliott Advisors. Elliott, which has retained a significant stake in the business, has since revamped and refocused the chain.