Game’s three-year plan to help turn around fortunes

The group, which operates 641 Game and Gamestation stores in the UK, announced a three-year plan to help it make “a step change” in online and digital sales, as more gamers download software from the internet rather than visiting shops to buy a games cartridge or CD.

Other aspects of its plan will see it accept different types of payment to help it appeal to more customers, convert more visitors to its stores into paying customers and send more marketing material to the estimated 15 million reward card holders on its database.

The company warned the change of strategy will see one per cent eroded from its profit margin but said it will increase earnings over the three years.

Game expects to invest nearly all of the £15m it will make through closing stores and other cost saving measures in its new plan.

Chief executive Ian Shepherd said: “The activities announced today will increase our revenues from new and existing channels, which will improve overall profitability.

“Over the next three years we are confident that the delivery of our strategic goals will be profit enhancing.”

Game, which made losses of £18.8m in the first half of 2010, this month began selling downloadable games for Xbox 360 in 40 of its stores as part of a six-month trial.

The strategy is led by Mr Shepherd, who was appointed in June to overhaul the business and revive its fortunes in the face of strong competition from the supermarkets and online retailers.

It has closed 42 outlets in the UK and Ireland since April and plans to reduce the number to 550 by Christmas 2013.

Game has also diversified into selling more consoles and computers and offering trade-ins for old computers and games.

In December, the company warned that profit margins would be hit as it runs more promotions to reverse falling sales.

Its most recent trading update provided some encouragement for investors, after it reported an improved sales trend over the Christmas period, despite disruption caused by the snowfall.

Game saw UK and Ireland like-for-like sales declines narrow to 0.5 per cent in the five weeks to January 8 from a 7.6 per cent drop in the previous 18 weeks, helped by strong demand for new games such as Call of Duty: Black Ops and football game FIFA 11.

The launch of motion-sensing devices Kinect for the Xbox and PlayStation’s Move also helped its performance.

Singer Capital Markets analyst Mark Photiades said Game’s investment was likely to see pre-tax profit estimates for 2011-12 nudge down by about eight per cent to about £41m.

“Despite investment in the current year leading to some estimate revisions the fact that management expect the initiatives to be earnings enhancing over the three-year period should be well received,” he said.