Game Group shares tumble after revenue warning

Game Group shares tumble after revenue warning

Shares in Game Group have more than halved since the UK retailer lowered its revenue forecasts last week.

On November 16 the company announced that instead of full-year revenue being between flat and three per cent down from last year, it expected it to fall by at least seven per cent. Despite its insistence that it was outperforming the videogame market as a whole – like-for-like revenue in the 41 weeks to November 12 fell 8.6 per cent, with the market down 12.3 per cent – it has clearly unsettled investors.

On the day Game announced the lowered forecasts, its share price fell from 15.75p to 10.25p, a drop of 35 per cent in a single day. It has continued to fall every day since, and at the close of trading last night its share price stood at just 6.66p.

In five days of trading since the announcement, its stock has slumped 57.7 per cent.

It's startling stuff given that at the beginning of 2011 Game Group's shares were each worth 70.5p, more than ten times their current value. In May 2008, its share price was 296.75p.

2011 has been a miserable year for the company. Despite growing its preowned business and experimenting with digital sales, its most recent financial results saw losses more than double. Its struggle to compete with online and supermarkets was put in stark context in March, when a leaked internal memo revealed that store staff were told to buy up stock of the newly released 3DS hardware at Tesco, and sell it as pre-owned.

Speaking to The Telegraph last week, however, analysts agreed that Game was well-positioned to recover. Despite expecting a £10.7 million loss at the end of the year, it has gained market share, will have around £120 million in cash in the bank, and with Wii U and Vita expected next year – and others seemingly set to follow – Game's fortunes are expected to improve.

As Sanjay Vidyarthi, an analyst at Execution Noble, put it: "Longer term strategy continues to make sense, but it is difficult to see where the short term pain ends."