Game Digital shares plunged after the retailer warned that profit would fall sharply after sales of games since the start of the Christmas holidays were worse than expected.
The seller of video games and consoles said UK sales for the 21 weeks to 19 December fell 11.4% to £353.4m as gamers failed to buy enough games for new consoles to make up for a steep fall in demand for older formats.
As a result, margins were squeezed and earnings before interest, tax and other items for the six months to 23 January will fall by about 30% to £30m, Game said in an unscheduled trading update. Sales in the wider video game market are down 13.5%, Game said.
Game’s shares fell as much as 40% and were down 35% to 135p as trading settled. The shares, which floated at 200p in June 2014, are down by more than 60% this year.
Sales of games for the Xbox One and PlayStation 4 consoles rose by 20%, or £19m, but sales of products for the old Xbox 360 and PlayStation 3 dropped by 57%, or £31m.
The company also suffered along with the rest of the high street from reduced customer numbers as shoppers took their time to buy presents in the hope of last minute bargains. It said trading during Black Friday, the pre-Christmas discount day at the end of November, was solid.
Game said it was about to enter its busiest trading period of the year but that recent trends prompted it to issue its second profit warning of the year. In January, the company said gamers were slow to buy products because retailers had bundled high-quality games with new versions of the Sony PlayStation and Microsoft Xbox before Christmas.
Martyn Gibbs, Game’s chief executive, 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 switchover has only become apparent in December which has been compounded by lower year-on year-high street and shopping centre footfall.”
Game said it thought margins would be higher in the second half than a year earlier as sales of games for new consoles increase and the impact of falling old format sales reduces.
Analysts at the stockbroker Liberum cut their forecast for full-year profit by 60% and said they expected Game to weigh up whether to maintain its dividend between now and the announcement of first-half results in March.
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