The retailer attributed soaring sales to an “unprecedented” schedule of software releases in the first half, but some analysts fear the good times cannot last.
Game’s total group sales leaped 54 per cent, on like-for-likes up 24.8 per cent. The retailer was bullish on prospects and expects pre-tax profits for the six months to July 31 to come in at about£33 million, dwarfing last year’s£2.7 million.
Group gross margin for the year to January 31, 2009 is likely to rise 50 to 100 basis points, up on the previous year’s 24.8 per cent.
Despite the numbers, City sceptics remained cautious. Investec analyst David Jeary said: “We believe the present games cycle is in its peak year and that sales and profit base will erode from next year.”
Numis analyst Nick Coulter said there would be a de-rating of the stock “in anticipation of lower like-for-likes, as the cycle fades”.
However, other brokers argued that Game and the market in general will continue to outperform. “The shorts, as usual, are trying to knock it,” said Pali International’s Nick Bubb. “The games market boom is likely to continue. This cycle is completely different to any other.”
Bubb maintained that, if US giant Gamestop looks overseas for further expansion, it may eye Game as a possible target.
Kaupthing analyst Matthew McEachran was also optimistic. He said: “Despite what most believe will be an inevitable coming back down to earth from next year onwards, short-term newsflow remains very upbeat.”
Game said there is ongoing demand for all hardware formats and increased demand for software, driven by an “unusually strong release schedule”, including the games Grand Theft Auto IV and Mario Kart, as well as the Wii Fit.
The retailer plans to increase its 1,299 global store count by 60 shops, which will be open in time for the Christmas trading period.
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