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Press announcement reads :

Games Workshop Group PLC ("Games Workshop" or the "Group") announces its half-yearly results for the six months to 28 November 2010.



Highlights:
· Revenue at £60.0m (2009: £62.5m)

· Revenue at constant currency* at £59.5m (2009: £62.5m)

· Gross margin at 76.7% (2009: 74.4%)

· Operating profit pre-royalties receivable at £5.8m (2009: £6.9m)

· Operating profit at £6.7m (2009: £8.1m)

· Pre-tax profit at £6.7m (2009: £7.9m)

· Earnings per share of 15.3p (2009: 21.5p)

· Net funds of £11.5m (2009: £4.3m)



Mark Wells, CEO of Games Workshop, said:



"Sales fell by 4% although this was largely offset by gross margin improvements. Efficiency initiatives were implemented in both sales and manufacturing operations. Pre-tax profit was down £1.2 million to £6.7 million. The focus remains on investing in Hobby centre openings and improving retail volume. Cash generation remains strong."

http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail.html?announcementId=10770556


fuller/more boring read

http://investor.games-workshop.com/downloads/results/results2011/2010-11_FinalHalfYearPressStatement.pdf

Core message: Sales and profits are down. Efficiency savings are stopping things from looking as bad as they might. That shows in the improved gross margin figure.

The problem with efficiency savings is that there is a limit to how much you can improve efficiency. GW have done very well for a few years, because they had let themselves get very inefficient before that, so there was a lot of improvement to be done.

Having done a lot, GW need to find a way to jack up sales in real number terms, not just improve revenues by increasing prices.

"Sales through independent retailers grew in Northern Europe and North America."

To me that indicates that more customers are going to indies for the lower prices.

Interesting that sales fell by 4% because the Office for National Statistics just reported that the UK economy contractd by 5%

Does that include the DE releases? (i assume it does)

rodgers37 wrote:Does that include the DE releases? (i assume it does)

Presumably so. And WHFB 8th Ed to so one can conclude that even with arguably two of the biggest releases in a fairly long time, sales are still down. Personally, I think some of it comes down to the general economic downturn and some of it due to GW's pricing policy.

Hope they don't get to fixated on increased margins because that of course would lead to price rise thinking (and they do love a price rise). To be honest they are doing well when you consider that when times are hard people tend to cut down on stuff they don't need and an expensive hobby like this would more than likely be the first thing to cut down on. If they can just keep plowing on for the next 3 - 5 years things will probably get better again, just prey they combat tight wallets with more stunning stuff like the DE releases and not mugging you in-store instead.

4% sales drop in this economical period isn't that bad, is it?

Also, how much would they stand to gain if they lowered prices by a bit instead of constantly jacking them up?

But also, does this include sales to the independent retailers? (Again i presume so....)

I think GW are making less money, because they are selling a lot more stock at 65% of the price to the independent retailers, they have been getting stricter with rules for them (No ebay selling etc), as they know how tempting it is too buy from other places (I thought i might go into the store and buy a Storm Raven on the day of release, but when i can get it for £10 cheaper on darksphere+ postage (still at least £5 cheaper) there is no reason to buy direct from GW.....)

Making more from cheaper prices is interesting, i don't think it actually works that well (i will give an example, the football club i support, are now being run by someone who actually has a financial and business knowledge finally, and match day tickets, are more expensive now, but even though that may get 500-1000 less ticket sales, than say if it were the same price as another club is charging, but that extra £5 or so on the tickets, gets more money in...) I think the fact GW are selling more and more (presumably) to the independent retailers, means they are making less revenue, if they sold all their stock themselves they would be making another £10 million or so on top of those figures...

If prices lowered, even by $10 dollars, I would buy twice as much gak as I usually do.

Flashman wrote:Interesting that sales fell by 4% because the Office for National Statistics just reported that the UK economy contractd by 5%

Make that -0.5% in the last quarter, and +0.7 in the third quarter.
http://www.statistics.gov.uk/cci/nugget.asp?id=192

I don't think its as easy to do a price drop like that.

If they were going to drop prices significantly, they'd have to do something about stopping other retailers from selling stock from them. Otherwise they wouldnt last.

Jaon wrote:If prices lowered, even by $10 dollars, I would buy twice as much gak as I usually do.

People always say this whenever the discussion of GW's sales performance or price rises comes up but I think the majority of people say they would buy more but in reality, would spend the same amount of money that they do now but obviously get more for it, which is not really of much benefit to GW, business-wise.

So what they will do is continue to jack the prices up until they reach a point where people start decreasing their spend 9and some would argue that GW financial figures are starting to reflect this already happening).

filbert wrote:

rodgers37 wrote:Does that include the DE releases? (i assume it does)

Presumably so. And WHFB 8th Ed to so one can conclude that even with arguably two of the biggest releases in a fairly long time, sales are still down. Personally, I think some of it comes down to the general economic downturn and some of it due to GW's pricing policy.

GW themselves say

GW's half year report wrote:As a niche business, Games Workshop, in general terms, neither benefits nor suffers from macro economic factors.

In other words, GW themselves do not ascribe their results to the state of the economy.

Kilkrazy wrote:

GW themselves say

GW's half year report wrote:As a niche business, Games Workshop, in general terms, neither benefits nor suffers from macro economic factors.

In other words, GW themselves do not ascribe their results to the state of the economy.

A fairly brave statement then I would say given that it could be fairly easy to blame under performance on economic factors like pretty much every other business that is reporting financial figures at the moment.

I wonder then, what they do attribute the drop in sales to? I have to confess i haven't read the full report, only skimmed through so I may have missed it...

Kilkrazy wrote:

filbert wrote:

rodgers37 wrote:

GW's half year report wrote:As a niche business, Games Workshop, in general terms, neither benefits nor suffers from macro economic factors.

In other words, GW themselves do not ascribe their results to the state of the economy.

Thats only a half truth - if the market is in a recession, all businesses will be down. When it comes down to choosing between food, house, vehicle, or toys, you're probably going to put toys at the end of your list.

Overall the financial position looks pretty strong. The best judge of how a company is doing is to look at their statement of cash flow (how they are getting their cash). The more cash from operations and the fact that they had a net income is always a positive thing, ESPECIALLY in today's market when losses are still the common place. Only get worried when GW shows a net loss but still maintains cash and is financing their activities as that is showing they are acquiring debt to pay their bills and cover their operating loss. Investing activities on the cash flow statement can be good or bad - operating profit they are great, net loss usually not a great sign as it shows they have some project they are working on which they should have disclosed in the financial statements (usually under CIP or investments).

"The focus remains on investing in Hobby centre openings and improving retail volume"


They could try opening a store or 3 in Florida. A state with a population of aprox 16 million, and one of the largest tourist destinations in the USA, and it doesnt have a single GW store. Not a single one.

Closest one is around 400+ miles away.

filbert wrote:I wonder then, what they do attribute the drop in sales to? I have to confess i haven't read the full report, only skimmed through so I may have missed it...

Well all I know is that they sure as hell won't be ascribing it to anything they've done. lol...

filbert wrote:People always say this whenever the discussion of GW's sales performance or price rises comes up but I think the majority of people say they would buy more but in reality, would spend the same amount of money that they do now but obviously get more for it, which is not really of much benefit to GW, business-wise.

I disagree with this, actually. The biggest obstacles that most gamers face when buying models are sticker shock and buyer's remorse. With the current price points set by GW, it's really easy to talk yourself out of making purchases, even when you're excited about a new release. Beyond that, I know a couple players as well who still spend good hobby money, but only on eBay auctions as they don't feel that they get enough bang for their buck from paying GW new product prices.

Finally, you have the stagnation of the customer base that comes with the extremely high buy-in rate for GW's games. If the game was cheaper, it would be easier to sell to new players, which creates growth. As it stands, Anima, Malifaux and Infinity seem to be enjoying a fair amount of growth in my area (along with War Machine/Hordes, which I know goes against my affordability argument ), while the market for Warhammer/40k has either become entirely static or started to recede.

SkaerKrow wrote:

filbert wrote:People always say this whenever the discussion of GW's sales performance or price rises comes up but I think the majority of people say they would buy more but in reality, would spend the same amount of money that they do now but obviously get more for it, which is not really of much benefit to GW, business-wise.

I disagree with this, actually. The biggest obstacles that most gamers face when buying models are sticker shock and buyer's remorse. With the current price points set by GW, it's really easy to talk yourself out of making purchases, even when you're excited about a new release. Beyond that, I know a couple players as well who still spend good hobby money, but only on eBay auctions as they don't feel that they get enough bang for their buck from paying GW new product prices.

Finally, you have the stagnation of the customer base that comes with the extremely high buy-in rate for GW's games. If the game was cheaper, it would be easier to sell to new players, which creates growth. As it stands, Anima, Malifaux and Infinity seem to be enjoying a fair amount of growth in my area (along with War Machine/Hordes, which I know goes against my affordability argument ), while the market for Warhammer/40k has either become entirely static or started to recede.

What I would suggest in defence is that GW traditionally relies on churn of users; the number of people already playing is of little or no relevance to them - they are really only interested in getting in the new players who make their one-off 'big bang' purchases and then very often drop the hobby after a short time. GW's strategy is all about getting these new people in and getting their spend. If that rate of entry had dropped then I think we would be seeing a greater dip in GW sales; as is, I think we are starting to see more and more 'veterans' ,for want of a better term, not buying as much or at all, because the price rises are starting to hit a saturation point.

I wonder if GW will run out of fat to trim before the economy regains some semblance of health. The whole enterprise seems like a half staved winter hare already. Remember when GW had a bitz service and real games days? I'm just waiting for the official announcement that hobby centres will be replaced by red shirts in vending machines.

I'm mostly kidding, but I would love to see a "you gotta spend money to make money" attitude take over right about now, rather than this cut-and-hide-and-cut-some-more BS.

Not all niche markets are created equal. If it's the high-market oriented, then probably growth is expected. The miniature/wargaming niche-market, however, doesn't work like that.

They seem to forget that less money coupled with more expensive essential stuff means people will be more "price sensitive", i.e. higher priced non-essentials will suffer from an almost constant comparison to other products.

I remember when they did the "buy three, get cheapest one free" campaigns. Promotions and special days probably bring in a lot of cash; they make the customer happy for a lot of reasons. Or the Skulls campaign, etc.

Thinking that their profits depend on the newcomers is absurd, and GW keeps the same modus operandi that's been giving it so much grieve.

There is also a point of incoming video games based on their IP.

Both Space Marine and DoW: Retribution are shaping up rather nicely.

Those two games should generate a healthy amount of royalties.. Which hopefuly funds the next generation of GW products and their quality.

Kilkrazy wrote:Core message: Sales and profits are down. Efficiency savings are stopping things from looking as bad as they might. That shows in the improved gross margin figure.

But, but the price increase was because of VAT!!!

I know many of us including me have often said that GW stuff is price inelastic, meaning that people go on buying it despite the price increases.

But when revenues drop 4% in a year, which GW themselves don't both to explain, only talking about how the economy doesn't affect a niche market, you have to wonder.

So for a laugh, I price up what a youngster or their father might need to spend to get into the HHHobby.

AoBR £55
IG Army Book £17.50
Eight tanks and vehicles at average £20 = £200
10 boxes of infantry £155.50
Some special models, like characters £30
Paints, tools and stuff £40

Total = £498

You should get a pretty reasonable army out of that, however compare it with the cost of a PS3 and a bunch of games, or a holiday in Italy, and so on.

Maybe they really have priced themselves too high.

They can't reduce prices all at once, because it would instantly reduce the worth of not only their inventory, but the inventory of all FLGS overnight.

If they were to reduce prices, it would have to be gradual, starting with new kits. Then, they would have to allow the FLGS to clear their old inventory as they reduce their wholesale prices slowly.

pombe wrote:They can't reduce prices all at once, because it would instantly reduce the worth of not only their inventory, but the inventory of all FLGS overnight.

If they were to reduce prices, it would have to be gradual, starting with new kits. Then, they would have to allow the FLGS to clear their old inventory as they reduce their wholesale prices slowly.

The other issue they have is saturation.
I have at least 20k points in warhammer stuff, none of which I got new, the only thing I got "new" was bits.
People clearing out and selling stuff from years ago are a huge market for the thrify and the converter.
I would not be supprised if in the future things get scaled up enough that older models are obsolete.

pombe wrote:They can't reduce prices all at once, because it would instantly reduce the worth of not only their inventory, but the inventory of all FLGS overnight.

If they were to reduce prices, it would have to be gradual, starting with new kits. Then, they would have to allow the FLGS to clear their old inventory as they reduce their wholesale prices slowly.

The problem is how they've priced their products, and they keep doing it.

The reason (I'm guessing here) that their target-audience are the newcomers is probably because they don't have a "price-comparison" system like people who've been in the hobby longer.

For example, I bought a box of Space Ork Boyz for 12.50€, online, with 11 Orks. With the release of the Dark Eldar, I bought a Kabalite Warriors box for 17.50€ from the same store, and by becoming an official GW distributor, they had to raise their prices accordingly, meaning that the Space Ork Box is now priced 17.50€.

Instead of buying two boxes of Dark Eldar for 25, I bought a single one. Instead of buying an Ork Box, I bought nothing, as I compare the new price/old price and see that an increase of nearly/exceeding 50% is ridiculous for a product that is already expensive.

The new player comes in, buys a couple of boxes, will probably stay a while in the hobby but he will start to do the same comparison many of us already did, and turn his back on the hobby as little by little the senseless price increases, together with (IMO) a bad costumer relationship,will mean that whenever they lower their prices, most of their real costumer base will be too alienated with the hobby to notice/care. The fact that it would be gradual, given their release schedules, means we're looking at a 12 year period (first to latest release of Dark Eldar for example), unfortunately.

Well it doesn't look horrific so I see that as a good sign. Warhammer Fantasy is a strange beast to predict because they are trying to sell stuff to existing players and get new players in. The big problem with that is that GW keep pushing the Apocalypse scale games whilst their competition focuses on games with a dozen figures either side. I think GW need to focus on small scale games for kids on pocket money and older players on reduced incomes who want to get involved again. Unfortunately the new hotness is hordes which flies in the face of small scale games. While I like the models in the Island of Blood, I think it is a terrible introduction as there are no starter game scenarios or army lists.

Longer term if GW maintain the Tolkien/Middle Earth licence then they will be in a good position for the Hobbit films.

GW's half year report wrote:As a niche business, Games Workshop, in general terms, neither benefits nor suffers from macro economic factors.

In other words, GW themselves do not ascribe their results to the state of the economy.

Kilkrazy wrote:GW themselves say

GW's half year report wrote:As a niche business, Games Workshop, in general terms, neither benefits nor suffers from macro economic factors.

In other words, GW themselves do not ascribe their results to the state of the economy.

Every year, GW has a revenue decline of about 4% (this year 4.8%) including the average 10% price hike per year (more so for introductory products), so about 10-15% less products sold each year. That's a stable trend independent of macro economic factors, only attributed to the achievements of the GW management. Guess what, the management is pleased with this decline and goes on with no changes in strategy (maybe fire some creative staff, some retail staff and close some more stores).