Game Group's 27% drop in full year profits and 14.4% fall in like for like sales in the subsequent eleven weeks has not only hit the company's own shares, but those of its rivals too.
Along with news that both chief executive Lisa Morgan and chief operating officer Terry Scicluna are unexpectedly stepping down, the update has sent Game shares 13.8p lower to 87.5p - making it the biggest faller in the FTSE 250. Talk that the company is now vulnerable to a bid from US rival Gamestop - a long standing tale - has done little to halt the decline.
Analysts said that losing its senior people at a time when it faced increased competition from supermarkets and online game distribution was likely to create considerable uncertainty. Singer Capital Markets said:
This degree of management change at a time when the business is facing tough conditions is likely to be unsettling. We suspect that conditions in the current year are likely to remain challenging with further sales declines expected, however new peripheral launches along with additional growth in pre-owned are likely to drive further margin advancements. Our concerns over the medium term, though, regarding pricing pressures, increased pre-owned competition and the online/digital threat remain unchanged.
Oriel Securities added:
Much of [the company's] progress will be overlooked as investors assess the departure of the highly respected chief executive, Lisa Morgan who has left the business to pursue other interests after 13 years of tenure. Perhaps more surprising is the departure of the recently recruited chief operating officer, Terry Scicluna, seen by many as a natural successor to Lisa Morgan. Interim chief executive Chris Bell (ex-Ladbrokes) has much to do to steady this ship over a relatively short period.
The weak current trading for Game has helped push HMV 3.65p lower to 81.3p, while Curry's owner DSG is down 0.88p at 34.92p. DSG also faces increased competition in the UK shortly with an update next Monday on the Carphone Warehouse joint venture with US group Best Buy. In a buy note on Carphone, UBS said:
[The] trading and strategy update on 26 April will be the first update since demerger [from TalkTalk]. It will incorporate fourth quarter results, guidance for 2010-11 and a visit to the first Best Buy branded store in the UK. There are no changes to our forecasts but given the stronger momentum in the third quarter the risk to "core" Best Buy Europe and Best Buy Mobile remains on the upside.
