Retailer group Game may break banking covenants as sales slump
SHARES in troubled retailer Game Group slumped again yesterday after the company said it may break banking covenants on the back of slumping Christmas sales.
The company, which controls the 'Game' computer game stores and employs nearly 6,000 people here and in Britain, plunged 44pc in London trading after the group said there was a "likelihood that it will not meet its EBITDA (earnings before interest, taxes, depreciation and amortisation) covenants" when they are tested next month.
The admission came as Game revealed like for like sales in the eight weeks to January 7 were down 15.2pc in the UK and Ireland, and off 12.9pc overall. For the 49 weeks to last Saturday, sales fell by 10pc across the group while margins were cut by promotional activity.
Full-year gross margins will be down 190 basis points, rather than the 150bps previously predicted. The reduction was due mainly to supermarket promotional activity.
Game has been hit hard by a fall off in computer game and console sales during the downturn and has issued a number of profit warnings. The computer game market is estimated to have fallen some 40pc since 2008 as users switch to online and smartphone games, many of which are free or cost only a few euro to buy. The stock is down nearly 95pc since February last year.
Group chief executive Ian Shepherd described himself as "angry" at having to deliver another profit warning but claimed the company was well placed to take advantage of a recovery when it happens.
In a statement, Mr Shepherd described the business as "incredibly tough" during 2011.
"We remain the market leader and have a clear strategy which will return the business to growth. We are adapting to the changing market," he added.