Marcus Evans Group | Worldwide Headquarters | American Offices | Latin America | European Offices | African / Asian Offices

Game reports sales slump but pins hopes on FIFA 12 and Call of Duty

Game makes all its profits in the second half and its hopes rest on consumers’ confidence returning at Christmas

The boss of Game insisted the video games market was not in terminal decline as the specialist chain fell to a first half loss of more than £50m.

Ian Shepherd batted away comparisons with troubled rival HMV as it reported a slump in trade and a bigger than expected loss of £51.5m for the six months to 31 July. He said it was “manifestly not the case” that games and console sales were now in structural decline, adding: “The video games market is structurally cyclical, but it’s a big industry and it’s here to stay.”

Game’s shares have lost two-thirds of their value in the past year but in a show of confidence in the company’s future the entire board has agreed to plough at least 20% of their pay into buying shares. The shares closed up 15% at 25.25p on relief the numbers were not even worse.

Game makes all its profits in the second half which contains Christmas but ahead of this year’s peak trading season Shepherd gave the hefty disclaimer that hitting its sales and profit targets hinged on all “the major titles launching well and consumers’ confidence returning at Christmas”. Games such as FIFA 12, which launches this week, and Call of Duty: Modern Warfare 3 which is out in November, are predicted to be Christmas’s big sellers.

Analysts expressed doubt that Game, which has been hit hard by competition from the supermarkets and online sellers, would succeed. Panmure Gordon analyst Philip Dorgan said the “what we need to do to hit guidance” section of the report read like a “five year old’s letter to Santa”. “We think that management is way too optimistic in its assumptions,” he said.

Pre-tax losses had more than doubled on the back of falling sales and a steep decline in profit margins as manufacturers Nintendo and Sony slashed the price of their hardware to boost sales. Game said it had taken share in a market that was down 15%: within that hardware sales were down 13.7% and software down 16.5%.

The video games market peaks and troughs on the back of new consoles which in turn trigger games sales. However, the Nintendo 3DS, which launched in March, received a lukewarm response and there were few major software titles, with only LA Noire achieving sales of more than £20m. Shepherd said the market was at its “cyclical low point” ahead of the next generation of Wii and PlayStation consoles which will arrive in 2012.

Game has been closing stores and moving into digital gaming, aiming to avoid the fate of other struggling specialist retailers, such as music and books group HMV, which have been hit hard by cut-price competition from supermarket groups and the internet. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds