Sales drop knocks Games Workshop

Fantasy war games retailer Games Workshop yesterday warned on annual profits after it revealed a downturn in sales towards the end of 2010.

The company, which makes collectable figurines for Warhammer and Lord of the Rings battle games, said pre-tax profits for the year to May were likely to be below market expectations of about 17m.

Sales fell 4 per cent in the half-year to the end of November, suggesting a sharp drop in sales since the company last updated the market in September.

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Current trading conditions mean it is unlikely to make up the shortfall over the second half of the financial year.

Julian Tolley, an analyst at HB Markets, issued a sell rating on the stock and estimated that the sales weakness might reduce profits by 10 per cent in the year.

He said: "Back in September, the first quarter update was trading in line with expectations, so the downturn has been abrupt in the second quarter and is ongoing."

The Nottingham-based company added that it continues to control its gross profit margin and costs.

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The chain was established in 1975 by gaming enthusiasts from London and has some 380 stores in locations including the UK, US and Australia. The majority of its models are made in Nottingham and Memphis.

It made a pre-tax loss in 2007 after the popularity of its Lord of the Rings characters waned and it reduced the size of its store estate. But it has grown its pre-tax profits every year since then and made 16.1m in the year ending May 2010.