Game Group hit by plummeting prices, aggressive bundles

January 14, 2015 | 12:09

Tags: #financial

Companies: #game #game-digital #game-group

Game Digital, the company behind the Game and former Gamestation high-street retail outlets and formerly known as Game Group, has admitted to investors that it will not meet earnings expectations for the past financial year.

A long-standing member of the UK high street, Game suffered major financial troubles in 2012: a 17.6 per cent drop in sales over the 2011 Christmas period led to a bleak start to the year, its stock was suspended with the conclusion from the London Stock Exchange that there was 'no equity value left in the company, and for a while it looked like the firm as a whole would go the way of the dodo. While hundreds of stores did close, the company was able to keep its head above water and manage a comeback of sorts - albeit at the cost of its Gamestation brand, which has now been replaced with the general Game brand. Following its administration, Game Group relaunched as Game Retail before settling on Game Digital as its new company name.

Now, the company has issued a statement to investors and press warning that it will likely miss its financial projections thanks to increased competition. Blaming a 'highly competitive Christmas trading period' - the same issue that led to 2012's financial troubles - the company pointed to numerous high-value bundles being discounted by the competition, leading to 'lower average selling prices and unprecedented bundling of games.' The result: despite hardware sales increasing an impressive 25.1 per cent year-on-year for the period, Game Group itself saw revenue drop by 5.4 per cent.

Martyn Gibbs, chief executive for Game Digital, has warned investors to be patient with the company for long-term rewards. 'Our strategy is to grow customer lifetime value and over the Christmas trading period. Starting with Black Friday, we invested margin in offering gamers competitive product propositions through the bundling of games with hardware and reduced pricing to recruit as many new generation customers as quickly as possible,' Gibbs claimed. 'We now have a huge customer base within the new formats, to sell both mint and preowned physical and digital content and accessories to over the long term.'

Investors, however, seem unconvinced: Game Digital shares, which were issued when the reborn company floated in May 2014, plummeted 50 per cent in initial trading this morning and despite a few rallies sit at a whopping 33.5 per cent down at the time of writing.
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