Game company warns on profits amid festive sales drop
Retailer Games 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.
The chain, which has 321 stores including nine in Northern Ireland, said sales of old-format games for PlayStation 3 and Xbox 360 consoles plunged by 56.7% in the 21 weeks to December 19.
Sales of games for Xbox One and PlayStation 4 consoles rose by one-fifth, but this failed to offset the steep drop for the old format games.
It also saw UK sales of games consoles drop 28% to £98.7m, although it said margins on these sales were low and had little impact on overall trading profits.
It added that while the next few days would be its busiest in the run-up to Christmas, the recent trends and disappointing sales since the start of school Christmas holidays were set to see half-year underlying earnings fall to around £3m - a drop of 30% on a year earlier.
Chief executive Martyn Gibbs 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."
Shares in the firm, which floated in June last year, plunged more than 40% at one stage after the profit warning.
This came despite assurances from the group that it was still hoping for a stronger second half of the 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.
Retail experts at Liberum said the warning comes at the "most critical time of year" for Game, adding that "the scale has surprised the company while the importance of Christmas trading has hugely magnified the issue".