Game boss Gibbs expects 'pain' of console upgrade to subside within a year

The entertainment specialist posted a 32.2% slump in pre-tax profit to £22.5m in the 26 weeks to January 23, blaming its reduced profitability on the impact of shoppers switching from older gaming formats to PlayStation 4 and Xbox One.

Gibbs admitted that the steep drop off in sales of games for older consoles – such as the PlayStation 3 and Xbox 360 – had caught it by surprise.

He said sales of software for the newer consoles had not offset those rapid declines “to date, but will do as we go forward,” despite sales of PlayStation 4 and Xbox One software rising 27% during its first half.

Gibbs told Retail Week: “The impact of the fall in legacy software sales – that’s for Xbox 360 and PlayStation 3 – has been faster than we anticipated. But that means that the impact will diminish in the future.

“We probably have six to 12 months to play through the whole piece, but the impact it has on the business will lessen on a month-to-month basis.

“The uptake of both the PlayStation 4 and Xbox One consoles has been really pleasing. But the pain, if you like, of that crossover has happened over a far shorter period of time than both we and any external market forecasts had predicted.”

Amazon

Gibbs refuted suggestions that competition from US etail giant Amazon had also impacted Game’s performance.

As reported by Retail Week, UBS claimed that Amazon took home one quarter of non-food growth in UK retail last year, but Gibbs was adamant that Game had not been hit by its rise.

He said the retailer was “differentiated” from Amazon through its customer reward scheme, exclusive licensed products, its trade-in service for old games and its multichannel approach, including “significant growth” in its click- and-collect offer.

Gibbs added: “We don’t dumb down Amazon at all in terms of us having to constantly play at our best game, but they are not having the same impact on us that they have in other sectors.”

Diversifying

Game is also seeking to build on its strategy to diversify into other areas. Sales of PC accessories, digital content and pre-owned mobile phones and tablets are all growing at a pace.

Sales in the latter category, which Game refers to as Gametronics, rocketed 93% in the 26-week period, but Gibbs insisted there was further room for growth.

“Those categories, we are at infancy with,” he said. “We took £23m on Gametronics and had 93% growth.

“I would say we are not in a place where we are pleased with our performance yet. We are pleased that we’ve got to where we are, but we see significant growth within that category – the same with PC accessories, the same with licensed merchandise as well.

“These higher growth areas delivered almost a third of our profit, against a quarter in 2015. So there’s a good balance, I think, in terms of the real progress that we are making on new formats and new categories versus the decline we are seeing in older categories.”