GAME Digital PLC (LON:GMD) shares surged in mid-morning Thursday after the firm reported solid Christmas trading.
For the seven weeks to 5 January, the video game retailer reported that like-for-like (LFL) sales were up 2% with UK Retail LFLs flat at -0.3% and Spain LFLs up 4.8%.
Group sales were down 0.5% for the period, although the trading margin rate had improved year-on-year due to a strong performance of higher margin exclusive products and a greater mix of high margin products and higher promotional margins.
For the 23 weeks to 5 January, group LFL sales were up 1%, with UK retail and Spanish LFLs were up 1.1% and 2.1% respectively.
Group sales for the 23 weeks were down 0.6%.
GAME said it preowned segment had “remained challenging” over the period, although added that “exceptional” working capital management had delivered an improved cash balance of £96mln at 5 January compared to £89mln last year.
Full year financial performance was expected to be in line with current expectations.
Martyn Gibbs, GAME’s chief executive, said the group had traded solidly over Christmas despite “a challenging retail climate”, delivering growth from exclusives, higher margin categories and a specialist consumer offer over the Black Friday sales period.
These had delivered “a pleasing margin outcome” which had helped offset a decline in the preowned segment, Gibbs said.
Move to AIM blocked
In a separate announcement, GAME said that based on proxy votes cast ahead of a general meeting on 17 January, a proposed move to delist its shares from the main market and admit them to AIM was not expected to be approved.
The group had initially proposed the move in December, saying AIM was “a more appropriate platform to enable GAME to deliver value more effectively to all of its stakeholders, including Shareholders”.
Analyst less convinced by numbers as UK trading stagnates
Despite the market reaction, Zoe Mills, retail analyst at GlobalData, was less impressed, saying that the negative LFL performance in the UK highlighted “the ongoing decline in demand for physical entertainment products”.
“With a number of popular video game releases in the run-up to Christmas, the gaming specialist should have seen a better performance, even with Xbox One X sales to annualise.”
Mills added that the solid performance of the group’s Spanish arm was no longer strong enough to support the struggling UK proposition, and that GAME’s BELONG gaming arenas would “continue to grow in importance”.
GAME shares were up 15.9% at 27p.
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