Game Digital hails solid Christmas trading
By Michele Maatouk
Date: Thursday 17 Jan 2019
(Sharecast News) - Shares in Game Digital rallied on Thursday as it reported a solid performance over the Christmas period.
The company said group sales were down 0.5% over the seven weeks to 5 January, but up 2% on a like-for-like basis. For the 23 weeks to 5 January, group sales were down 0.6% but up 1% on a LFL basis.
LFL sales in UK retail were up 1.1% for the 23 weeks and down 0.3% over the seven-week period, while Spain saw a stronger performance, with sales up 2.1% year-to-date and 4.8% for the seven weeks.
The company said its pre-owned segment remained challenging over the period, but the full-year financial performance of the group is expected to be in line with management's expectations.
The group trading margin rate improved compared to the previous year over the seven weeks, reflecting strong performance of higher margin exclusive products, a higher mix of higher margin products and higher promotional margins.
Meanwhile, Game said it had net cash of £96m as at 5 January, up from £89m the year before.
Chief executive officer Martyn Gibbs said: "Despite a challenging retail climate, the group traded solidly over the Christmas period, with encouraging like-for-like sales in both territories.
"The group successfully delivered growth from exclusives, higher margin categories and our specialist customer offer over the Black Friday event, which all contributed to a pleasing margin outcome and helped to offset the continued, managed decline of pre-owned."
At 1310 GMT, the shares were up 12% to 26p.
Liberum said Game's net cash position is "very positive" and provides strong valuation support at 2.5x the current market capitalisation.
Meanwhile, Canaccord Genuity said it was "very encouraged" by the update in the context of the depressed rating.
"We continue to believe that the current share price very much overstates the perceived existential threat presented by streaming (digital download only) protocols and a generally challenged high street while entirely underplaying management's quite radical strategic repositioning of the business towards higher margin experiential formats, notably BELONG," the broker said.
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