Forum adverts like this one are shown to any user who is not logged in. Join us by filling out a tiny 3 field form and you will get your own, free, dakka user account which gives a good range of benefits to you: No adverts like this in the forums anymore. Times and dates in your local timezone. Full tracking of what you have read so you can skip to your first unread post, easily see what has changed since you last logged in, and easily see what is new at a glance. Email notifications for threads you want to watch closely. Being a part of the oldest wargaming community on the net. If you are already a member then feel free to login now.

So is this consistent currency thing something every international company deals with, and a totally BS excuse, or are GW in a unique position with it due to what I can only then assume is poor management?

I mean its not like they are the only people who manufacture then sell overseas, what makes this an issue worth talking about and not just a regular old aspect of running a business?

It's something that a lot of international companies deal with when they're not truly giant yet have substantial overseas operations. Nintendo is commonly cited as having experienced difficulties during the Wii era when the majority of its business was done outside of Japan, and the Yen kept on getting stronger and stronger. Revenues fell even as sales grew, with the result that they (in a very unpopular move) actually INCREASED the price of some of their products in some territories, something unheard of in that market.

 jonolikespie wrote:
So is this consistent currency thing something every international company deals with, and a totally BS excuse, or are GW in a unique position with it due to what I can only then assume is poor management?

I mean its not like they are the only people who manufacture then sell overseas, what makes this an issue worth talking about and not just a regular old aspect of running a business?

If you read my earlier post companies use constant currency numbers to help investors understand the true health of the companies accounts when they trade in many different countries.

I quote..

"This calculation exists to make financial statements "cleaner."


So GW saw a modest increase in sales at constant currency is the thing investors will be most interested in, its not an excuse at all like many want it to be. Because remember when the pound is weak the shoe could be on the other foot and sales could be falling and profits rising.

Seriqolm wrote:

 jonolikespie wrote:
So is this consistent currency thing something every international company deals with, and a totally BS excuse, or are GW in a unique position with it due to what I can only then assume is poor management?

I mean its not like they are the only people who manufacture then sell overseas, what makes this an issue worth talking about and not just a regular old aspect of running a business?

If you read my earlier post companies use constant currency numbers to help investors understand the true health of the companies accounts when they trade in many different countries.

I quote..

"This calculation exists to make financial statements "cleaner."


So GW saw a modest increase in sales at constant currency is the thing investors will be most interested in, its not an excuse at all like many want it to be. Because remember when the pound is weak the shoe could be on the other foot and sales could be falling and profits rising.

Using it is also based upon the assumption that investors are unable to tell the difference which shouldn't be the case since GW are primarily vested by institutional investors.

Also, recall that GW used to have manufacturing and warehousing in the US as well as the UK which actually contributed to some of their better reports due to the weakness of the dollar vs the pound.

Basically you are right. If GW Notts make a kit costing £25 to manufacture, then GW France needs to sell it for more than £25, while it has been priced at perhaps 30 Euros. If the Euro value drops, 30 Euros may become worth less than £25, and the company loses money.

Given a sufficient variation of exchange rate, it is possible for GW France to sell more kits and make less money. (GW's trading statement says this is what has happened.)

Of course the opposite also can happen, and GW benefited from a weak GBP for several years after 2008.

The historical variation of exchange rates does tend to even out over time. For example, in the past 20 years the JPY/GBP rate has varied from about 200 down to 120, up to 240, down to 120, and back up to about 190 right now. IDK what the average is over that whole period, but probably about 180.

These swings were very significant, and do not happen overnight, but they certainly happened over the course of a few months to a year or two. Obviously if a foreign currency varies by 100% over 18 months, it will put a big dent into your company's accounts.

 Talys wrote:
The profit numbers matter a lot. But if 4% is actually the number, considering THREE of the 6 reported months are Age of Sigmar, they should be popping the champagne. And it would also justify future investments in AoS.

After all, internet wisdom was that skids of Sigmar plastic were sitting unsold because everybody hates the game.

A lot of that depends on how they do the accounting. If stuff's sitting in LGS's and not moving off of *their* shelves, GW still gets to count that as a sale. If WHFB was already pretty much dead (which by all accounts it was), and AoS likewise also dead, well, there's nothing really to celebrate.

By the way, the wildly fluctuating currencies wreaking havoc is a real thing.

Yes, but it's what GW blames literally every single year for any sort of negative numbers.

You can't just handwave away revenue decreases, year after year after year, for over a decade like this. Any one particular year? Sure, maybe. When your revenue has been declining since 2004? That's another story.

What GW count as a sale, is a unit of product that someone has bought as of the day it is ordered and goes off GW books in return for a promise to pay for it.

If an independant distributor or retailer orders a kit costing £100, then GW record a sale of £100, even if the cash has not been handed over and the kit has not been shipped out yet. This example imaginary kit doesn't need to be in an end user's hands unless it is going through GW's own retail outlets.

 Vaktathi wrote:

You can't just handwave away revenue decreases, year after year after year, for over a decade like this. Any one particular year? Sure, maybe. When your revenue has been declining since 2004? That's another story.

Don't forget the last couple of years where we got the, "well, the one-man stores are a great idea but the change is still working its way through and we've experienced a downturn due to that."

Implementation dip is a real thing but at some point an organization has to take responsibility for their own successes/failures not apply handwavium and hope nobody notices.

Currency fluctuations also mean less when you raise prices on your products at higher than inflation rates...

 agnosto wrote:

 Vaktathi wrote:

You can't just handwave away revenue decreases, year after year after year, for over a decade like this. Any one particular year? Sure, maybe. When your revenue has been declining since 2004? That's another story.

Don't forget the last couple of years where we got the, "well, the one-man stores are a great idea but the change is still working its way through and we've experienced a downturn due to that."

Implementation dip is a real thing but at some point an organization has to take responsibility for their own successes/failures not apply handwavium and hope nobody notices.

Currency fluctuations also mean less when you raise prices on your products at higher than inflation rates...

Yeah, I keep wondering what the next excuse will be for declining sales. Probably start blaming the customers next

Well i went back and had a look and the constant currency bit does seem to be in the older reports, so i guess it's just me.

 agnosto wrote:


Implementation dip is a real thing but at some point an organization has to take responsibility for their own successes/failures not apply handwavium and hope nobody notices.

They had the LOTR bubble and blamed that for all kinds of disasters. "They got complacent with their success" or however they liked to spin it. Soon they will probably have The Hobbit…Hole (?) to blame for whatever bad happens.

Mario wrote:

 agnosto wrote:


Implementation dip is a real thing but at some point an organization has to take responsibility for their own successes/failures not apply handwavium and hope nobody notices.

They had the LOTR bubble and blamed that for all kinds of disasters. "They got complacent with their success" or however they liked to spin it. Soon they will probably have The Hobbit…Hole (?) to blame for whatever bad happens.

Not likely - The Hobbit never became a big enough bubble to cause much damage when it collapsed.

Hell... it is a chewed wad of gum, with no bubble in sight.

The Auld Grump

 jonolikespie wrote:
So is this consistent currency thing something every international company deals with, and a totally BS excuse, or are GW in a unique position with it due to what I can only then assume is poor management?

I mean its not like they are the only people who manufacture then sell overseas, what makes this an issue worth talking about and not just a regular old aspect of running a business?

One thing to keep in mind is that not all business work the same way. If you sell raw materials, agricultural goods, or even many industrial goods, you often sell the goods in your own currency, or negotiate a price for every order in the buyer's currency, despite selling to overseas customers. For example, for milk, eggs, or steel, currency fluctuations make it so that you make more or less money because there is more or less demand, but it doesn't affect your gross profit margin. On the other hand, for companies like GW (and Nintendo, as mentioned above), the price quoted is in the buyer's currency, and is locked in for a very long time.

In GW's case, too, a huge percentage of their business is NOT in their home currency; it's not like only a quarter of their business is overseas. So yes, constant currency is a valuable tool to understand whether a company is doing well or poorly; on the other hand, the bottom line is important too, because if you make a tens or hundreds or thousands of millions or lose tens of millions, ultimately, and especially in the long term, all the reasons why are less important than the results.

It's also worth mentioning that a lot of US companies aren't as affected, because a great deal of international commerce is conducted based on the USD, and prices quoted in USD are the norm for many transactions. So it becomes more or less expensive for the buyer, and the buyer must suck it up. In a way, the same thing happens when we're talking about Forge World models. You can get a 20% discount, or pay a 20% premium, just based on when you buy the model.

This is out of an investing booklet -

While many companies do a good job managing currency volatility, reporting it in a meaningful and transparent way that keeps investors and other stakeholders informed, a sizable number appear still to be grappling with the issue.
So, how should companies present bottom-line results when currency volatility distorts the bigger picture? When is it appropriate to explain that a “loss” is not a loss, but simply the result of a — perhaps very temporary — currency movement?

Net profit or loss, naturally, is usually the first metric to catch investors’ eyes. But that number packs in many variables, including currency impact, that can leave management looking for ways to explain which variables are “central to a company’s operations and which variables may be slightly less vital,” says Chris Rhodes, accounting advisory partner at PricewaterhouseCoopers (PwC).

 TheAuldGrump wrote:

Mario wrote:

 agnosto wrote:


Implementation dip is a real thing but at some point an organization has to take responsibility for their own successes/failures not apply handwavium and hope nobody notices.

They had the LOTR bubble and blamed that for all kinds of disasters. "They got complacent with their success" or however they liked to spin it. Soon they will probably have The Hobbit…Hole (?) to blame for whatever bad happens.

Not likely - The Hobbit never became a big enough bubble to cause much damage when it collapsed.

Hell... it is a chewed wad of gum, with no bubble in sight.

The Auld Grump

As an over the top "we forgot what made the predecessor so good" blatant cash grab, the hobbit "trilogy" might be an apt title for GW to exploit and for us to use as a comparison. It does really put into less geeky (but still geeky) laymans terms what GW has been doing wrong over the past few years (BaC and forgeworld excluded).

Currency schmurrency. That is the same excuse USA based EXPORTERS use. This argument just can't be both ways. Either Caterpillar can use the currency excuse of strong USD or GW. I find CAT's argument much more compelling. But I'm no economist. I'm just a gamer, and Betrayal looks BORING and only seems to be getting good reviews for the minis and AoS.... well.... I don't need to say much about that "game."

I don't think there's any way to make a (another) decline in sales seem like an achievement.

Oh they will spin it. Every company does.

 doktor_g wrote:
Either Caterpillar can use the currency excuse of strong USD or GW.

No, that's incorrect because GW aren't using the strong USD as an excuse, they are using a strong GBP as an excuse. That statement would only apply if Caterpillar was a US based company trading solely with the UK and GW was a UK based company trading solely with the US, obviously they both trade globally so your assumptions are flawed.

GW is a UK based company, a strong USD helps GW, but GW also trades in Europe and the GBP has been stronger than the Euro, which hurts them. At a very ROUGH estimate, they're about 11% WORSE off in Europe and about 7% BETTER off in the USA compared to the same period last year. Those are rough estimates because I didn't calculate averages, I just guessed an average based off the graph. The GBP has also been strong relative to the smaller markets like Oz, Hobbit Land and Canadia, so GW are losing in all those markets too.

Caterpillar, I don't know anything about them, but if they're a US based company then they're getting hurt everywhere because the USD has been strong relative to both the GBP and the Euro. They would also trade heavily with Asia and the USD has been strong relative to the Asia-Pacific markets.

So GW are losing on one front and gaining on the other (but by my estimates, not as much). Caterpillar are losing on all fronts.

EDIT: I'm not sure how much either company makes in China these days, but the GBP is weaker next to the CNY, which would also hurt when they purchase things from China, the USD is strong relative to the CNY, so Caterpillar would get hurt selling to China, but would be better off when they buy things from China. As far as I'm aware GW doesn't sell a considerable amount to China so having a weaker GBP/CNY can't help them.

There is a valid point in GW's position. If the Euro drops 10% compared to the GBP, then GW can increase their Euro sales by 5% in volume and money terms, but the books will show it as a 5% drop in European sales. (Simplified.)

However, next year, if the Euro strengthens 10%, suddenly there will be a huge leap in sales revenue without an increase in sales numbers.

Wargames have a fairly strong network effect operating, so it's always good to recruit more customers, which canny investors would want to know about even if the bald, top-line figures seem to show a fall.

Against that, a fall in revenue is a fall in revenue whatever the reason. If Euro sales dropped 5% due to currency, then GW have that much less cash on hand at the end of the year.

So really, whether this is a good thing or a bad thing depends on your attitude as an investor.

 nullBolt wrote:
How I imagine the conversation in Nottingham going:

Why do I have the feeling this is true?

 TheAuldGrump wrote:

Mario wrote:


They had the LOTR bubble and blamed that for all kinds of disasters. "They got complacent with their success" or however they liked to spin it. Soon they will probably have The Hobbit…Hole (?) to blame for whatever bad happens.

Not likely - The Hobbit never became a big enough bubble to cause much damage when it collapsed.

Hell... it is a chewed wad of gum, with no bubble in sight.

The Auld Grump

My point was that The Hobbit won't create a bubble or huge sales so they will be disappointed and point very surprised at the hole (where their profits should be) along the lines of "LOTR was very successful and this should have been too. For some (unexplainable) reason it didn't generate much profit and that's why, this year (whenever they use that excuse), the sales are down again".

The way I see it, when they got the LoTR licence, GW opened a gold mine. Thanks to massive product placement, the huge publicity and popularity of the films for several years, and other promotion like the DeAgostini magazine, they sold tons of LoTR stuff, made loads of money and spent it on enlarging their retail chain.

But somehow, when all the promotion surrounding the film and game went away, GW expected people to keep on buying at the same rate or transfer to 40K or Fantasy. This didn't happen, for pretty obvious and predictable reasons, and GW found themselves with egg on their faces.

The Hobbit could have been another gold mine but it didn't work because the films weren't as popular and in particular, the Hobbit game products were an awful lot more expensive. Therefore, the Auld Grump is right. There hasn't been a Hobbit boom so there can't be a bust.

The sad thing is that if GW had played the whole Hobbit campaign better, they could potentially have sold more Hobbit stuff, avoided a post-Hobbit bust, and recruited people back to LoTR as well. (Just my personal opinion, of course.)

 Kilkrazy wrote:
The way I see it, when they got the LoTR licence, GW opened a gold mine. Thanks to massive product placement, the huge publicity and popularity of the films for several years, and other promotion like the DeAgostini magazine, they sold tons of LoTR stuff, made loads of money and spent it on enlarging their retail chain.

But somehow, when all the promotion surrounding the film and game went away, GW expected people to keep on buying at the same rate or transfer to 40K or Fantasy. This didn't happen, for pretty obvious and predictable reasons, and GW found themselves with egg on their faces.

The Hobbit could have been another gold mine but it didn't work because the films weren't as popular and in particular, the Hobbit game products were an awful lot more expensive. Therefore, the Auld Grump is right. There hasn't been a Hobbit boom so there can't be a bust.

The sad thing is that if GW had played the whole Hobbit campaign better, they could potentially have sold more Hobbit stuff, avoided a post-Hobbit bust, and recruited people back to LoTR as well. (Just my personal opinion, of course.)

I completely agree with every point, I am not saying The Hobbit had a boom (or will have one). That's why it mentioned a Hobbit Hole (= financial hole, as in debt or lack of money) and they will use the that difference in performance (between LOTR and Hobbit) as an excuse. Essentially: "It should have performed the same but it didn't. How could that happen?" Without mentioning that the movies had different degree of popularity (or even blame the movies), the price increase, or the lack of outside advertisement or magazine.

For some reason they think new consumers just appear as if by magic and can't comprehend that advertisement (or just simple exposure outside of your niche) actually works. The original post I replied to was that an "organization has to take responsibility for their own successes/failures" and I'm just saying The Hobbit will probably be the next scapegoat. They can wring one more year excuses from that.

LotR ended up damaging GW because they got used to bringing in all that extra income - and it was from sources that came to them, rather than GW reaching out and trying to attract new customers.

Because it was part of the deal, LotR got a lot of advertising - and showed up in mainstream toy, game, and book stores.

All of this withered like Jonah's gourd - and GW was not in any way prepared for the enormous hole that lack of extra income left.

So it did a lot of damage to the internals of GW.

They went out of their way to make sure that the Hobbit would not hurt them in a similar fashion - which meant that they never got that extra income, and did not have to deal with the aftermath when the sales dried up.

The Auld Grump

TheAuldGrump, I don't know if you are serious or if that's the usual dakkadakka snark aimed at GW's corporate decision making process. I think it's snark mixed with GW justification for their bad handling of the LOTR profits. They wasted the money (I think some went towards new injection moulding machines) and then cried about their revenue declining while doing absolutely nothing to keep all these new customers or to expand their customer base further.

Honestly, I think a lot of the problem is that GW is used to being a passive business. They have a product, people learn of the product through osmosis, people come to them to buy the product.

They're not used to the idea of the more traditional method of hunting customers. They're used to resting on their laurels. Now companies like Privateer, Mantic and Corvus Belli come along and follow traditional methods and GW gets fethed by it.

It doesn't help either that GW's horribly inflated costs (which are, in all honesty, probably justified by GW's bloat of infrastructure and consistently declining revenue stream) have created a considerable secondary market of... Other producers who often sell for less than half of the price that GW demands and make huge profits by doing so.

TL;DR: GW's strategy has got it caught in a trap and it can't change.

Mario wrote:
TheAuldGrump, I don't know if you are serious or if that's the usual dakkadakka snark aimed at GW's corporate decision making process. I think it's snark mixed with GW justification for their bad handling of the LOTR profits. They wasted the money (I think some went towards new injection moulding machines) and then cried about their revenue declining while doing absolutely nothing to keep all these new customers or to expand their customer base further.

I am being completely serious.

No snark at all.

GW is not the only business that has been damaged by the aftermath of a big boom for one of their lines.

It is called 'boom and bust' - please look it up before accusing me of snark. It is also sometimes called a 'bubble' - and can leave a company in tatters when the bubble bursts. (Hell, look at the Great Depression - a real estate and stock market bubble that took the world economy with it when it popped.)

Investing in new machines was not waste - updating capitol investments is a good thing.

Tearing out the injection molding machines in their US center - that was a waste. The US market for their games has enough mass to justify those machines.

Some of the other costs were unavoidable - they needed to expand their sales force to handle the increased load - but that meant having a much larger overhead when the LotR boom ended.

What they needed to do - but didn't - was come up with ways to hold onto that huge lead that LotR had given them.

Instead, they patted themselves on the back for a job well done... until the job wasn't going so well.

The thing that I consider 'waste' is when GW hands out dividends in a cycle where they have lost market.

Or put up an enormous statue dedicated to an untested game.

When they decide that market research is Otiose in a Niche Market. And proudly trumpet about how they don't do any. (I actually think that the last time they did any they were told that they were doing things wrong - and decided that the research was wrong, because obviously they weren't.)

Disbelieving market research can have dire effect.

The Auld Grump

The Sigmarine statue is interesting because on the face of it the purpose is to appeal to current staff and dedicated fans of GW.

I wonder how many heretics saw the statue unveiled and wondered how much cash had been diverted from their Christmas bonus or party, or even from making new games, to pay for that piece of frippery.

 Kilkrazy wrote:
The Sigmarine statue is interesting because on the face of it the purpose is to appeal to current staff and dedicated fans of GW.

I wonder how many heretics saw the statue unveiled and wondered how much cash had been diverted from their Christmas bonus or party, or even from making new games, to pay for that piece of frippery.

Oh my word, I had not seen this and have just googled it

Haven't they done other big "things", like a space marine in the front previously, and a life-size Rhino somewhere? My local GW store has a life-size space marine statue in it (not out of any expensive material, I'm sure).

I don't know why people would say this is a waste of money, any more than building a fountain in the front of an office building. I'm pretty sure they didn't have to pay millions for it Not that I think it's gorgeous or anything, but whatever... it's a statue. Can't miss the building if you're driving up to it LOL.