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Working in hobby shops is a lot of nerds dream job so it's pretty telling about the corporate atmosphere that they have such bad retention and recruitment problems.

 Yonan wrote:
Working in hobby shops is a lot of nerds dream job so it's pretty telling about the corporate atmosphere that they have such bad retention and recruitment problems.

The dream pales somewhat in the face of unrealistic sales targets, one-man-stores and having to deal with gamers all day...

 jonolikespie wrote:

 Reinholt wrote:
while the cat itself is on fire in their driveway.

I totally agree with what you're trying to say but this seems like a whole other problem.

I want to know what his cat is doing with a rear view mirror.

 insaniak wrote:

 Yonan wrote:
Working in hobby shops is a lot of nerds dream job so it's pretty telling about the corporate atmosphere that they have such bad retention and recruitment problems.

The dream pales somewhat in the face of unrealistic sales targets, one-man-stores and having to deal with gamers all day...

Perhaps GWs target market version of yeah ; p Like most people I considered being a teacher. Then I remembered it involved being around teenagers and came to my senses!

 Kilkrazy wrote:

Based on latest financial disclosure Games Workshop Group plc has Probability Of Bankruptcy of 71%. This is 91.82% higher than that of the Consumer Goods sector, and 63.3% higher than that of Recreational Goods, Other industry, The Probability Of Bankruptcy for all stocks is 79.88% lower than the firm.

71% probability of bankruptcy within 2 years?

Ouch.

To be absolutely correct, it is 71% chance of a serious financial crisis possibly leading to bankruptcy.

However, suppose that revenue stays steady for the next year. The £4.5 M of exceptional expenditures does not have to be repeated. The £2 M of cost savings comes into effect. Suddenly, GW's profit is up by £6.5 M on the same revenue of about £122 M. (I am ignoring the effect of their increasing Cost of Sales.)

Everything would be looking pretty good.

The key worry is if Kirby's explanation for the revenue drop -- the difficulty of finding staff for the one man shops -- should be wrong. In that case there might be another 8% drop in sales, or worse. If he is right, though, they ought to be able to staff up and then we might even see an increase in revenue.

My personal view is that the one man shops are only a part of the problem.

The "exceptional costs" in a downward spiral tend to be like temporary taxes... once implemented they go from exceptional to permanent.

Considering GW pulled out all their heavy hitters in the last year and still managed a serious decline, the trends are not working in their favor that they will only decline by another 8%-11%. More than likely, we are going to witness an acceleration of losses from this point forward. When you look at performance just since 2012, GW is down 14% on previous sales growth (going from just over 6% in 2012 to -8% in 2014). Already the last two years are showing this accelerating, and accelerating quickly.

The next year should show the decline continuing even further. At best, I would expect a 16% decline, more likely we'll be looking at 19%-24% decline in gross revenues. If they manage to stay at -16% or above they can still turn a profit, but it is obvious it will be their last year of doing so without dramatic 'into the bone' cuts. If they hit a 19% decline or more, additional "exceptional costs" are going to come into play and they just won't be able to cut fast enough to avoid complete collapse. Of course, this will be the new CEOs fault as he/she will have to manage through this.

GW really cannot cut much further without losing serious cores in their business.

If they axe their stores, reallocate production to cheaper places, hire cheaper people to sculpt and write for them, at the end of the day if they still lose money they will not be in business.

 Kilkrazy wrote:
To be absolutely correct, it is 71% chance of a serious financial crisis possibly leading to bankruptcy.

However, suppose that revenue stays steady for the next year. [...]

You already know what was released last year, you already know what 's still left, so... you already know that's never, ever, going to happen.

It's kind of sad, really. I've been playing GW games since 1995, almost 20 years. Over half of my life. I have fond memories of playing GW games through the years. I still enjoy playing 40K with my friends. I'm working on an Emperor's Children Legion army for 30K, I plan to start a 30K Mechanicum force as well. And to see the projections that GW may be gone in as soon as two years is, well, rather depressing. It's like when I read the end of the last Wheel of Time book, and realized I just came to the end of a book series that had been with me for over half of my life.

And it is completely within GW's means to prevent this from happening. But, I fear this is exactly what "Kirby and his Kronies" want: to ride the dividend and salary train as long as they can until it all goes under, the golden parachute deploys, and someone buys the stock up for cheap and GW becomes somebody else's problem.

 Tannhauser42 wrote:
It's kind of sad, really. I've been playing GW games since 1995, almost 20 years. Over half of my life. I have fond memories of playing GW games through the years. I still enjoy playing 40K with my friends. I'm working on an Emperor's Children Legion army for 30K, I plan to start a 30K Mechanicum force as well. And to see the projections that GW may be gone in as soon as two years is, well, rather depressing. It's like when I read the end of the last Wheel of Time book, and realized I just came to the end of a book series that had been with me for over half of my life.

And it is completely within GW's means to prevent this from happening. But, I fear this is exactly what "Kirby and his Kronies" want: to ride the dividend and salary train as long as they can until it all goes under, the golden parachute deploys, and someone buys the stock up for cheap and GW becomes somebody else's problem.

Which may explain why GW wants to buy back stock.

The Auld Grump

I'm just going to put out a couple of observations on the passing year.

New 40K release.
New Space Marines codex. Like it or not, it's always a big seller for GW.

Alongside those, several other new codexes and expansions.

And GW is still in decline, even after their (arguably) two biggest sellers in the same year.

Of course, there are a thousand other factor's that I'm missing out here, but the fact that even two of GW's biggest sellers couldn't produce a profit for GW really speaks volumes, in my very humble opinion.

Now I'll just wait for someone that knows what they're actually talking about to shoot me down

 insaniak wrote:

 Yonan wrote:
Working in hobby shops is a lot of nerds dream job so it's pretty telling about the corporate atmosphere that they have such bad retention and recruitment problems.

The dream pales somewhat in the face of unrealistic sales targets, one-man-stores and having to deal with gamers all day...

If dakka dakka is representative of the types of people involved, I'd quit too.

 Wayshuba wrote:

Considering GW pulled out all their heavy hitters in the last year and still managed a serious decline, the trends are not working in their favor that they will only decline by another 8%-11%. More than likely, we are going to witness an acceleration of losses from this point forward. When you look at performance just since 2012, GW is down 14% on previous sales growth (going from just over 6% in 2012 to -8% in 2014). Already the last two years are showing this accelerating, and accelerating quickly.

The next year should show the decline continuing even further. At best, I would expect a 16% decline, more likely we'll be looking at 19%-24% decline in gross revenues.

Such a decline would be very extreme. Given that despite everything, their sales have been quite stable over the last decade (sans the LOTR bubble), it would seem unlikely they'd suddenly collapse so dramatically. Also, I disagree with the idea that GW has nothing "big" left to release - for starters, 7th edition 40k sales boost (if such thing happens) will mostly be including in 14-15 financials.

Far more likely is a slow drippling down of sales over the next 5-10 years if nothing dramatic happens (worldwide economic depression, complete makeover of the GW leadership & direction etc).

The 9% drop in sales to 3rd parties has nothing to do with staffing problems in 1-man stores.

Backfire wrote:

Such a decline would be very extreme. Given that despite everything, their sales have been quite stable over the last decade (sans the LOTR bubble), it would seem unlikely they'd suddenly collapse so dramatically.

Until recently, I would have thought the same. However, the rapid decline of WHFB into near irrelevance shows a pattern that could be repeated by 40K. Less than wonderful rules, rapidly escalating product prices and increasing army sizes are the probable culprits in the decline of WHFB. This pattern is easily repeatable for 40K. The declining customer base (caused by the above problems) that has been hidden by price increases has apparently reached a failure threshold (minimum number of customers) for WHFB. Given this years sales revenue decline and the fact that 40K is the GW sales driver, we could be approaching the minimum customer threshold that 40K needs to survive at the current level of GW's expenses/cost of operations.

timd wrote:

Backfire wrote:

Such a decline would be very extreme. Given that despite everything, their sales have been quite stable over the last decade (sans the LOTR bubble), it would seem unlikely they'd suddenly collapse so dramatically.

Until recently, I would have thought the same. However, the rapid decline of WHFB into near irrelevance shows a pattern that could be repeated by 40K. Less than wonderful rules, rapidly escalating product prices and increasing army sizes are the probable culprits in the decline of WHFB. This pattern is easily repeatable for 40K. The declining customer base (caused by the above problems) that has been hidden by price increases has apparently reached a failure threshold (minimum number of customers) for WHFB. Given this years sales revenue decline and the fact that 40K is the GW sales driver, we could be approaching the minimum customer threshold that 40K needs to survive at the current level of GW's expenses/cost of operations.

Exactly. Wargames live and die by the network effect. GW games' greatest strength isn't their models, or their IP, but their ubiquity. The harder it is to find a game, the faster people will drop out. If/when a collapse occurs, it'll be exponential, not linear.

I agree. One of the key selling points of 40K and WHFB is how widely it is played.

Once that goes into reverse you get a situation where one of the key points is how many people are abandoning it for other games, and persuading potential new recruits to follow suit.

IDK if GW are at that point now, but I believe that they are close.

Remember, in the eyes of GW management:

The Hobby is buying GW Miniatures.

If we take that statement at face value, GW doesn't recognize the wargaming and community side of the hobby. The network effect may be invisible to the GW management. Doubly so if GW is focused on the UK market where its products would retain a higher market share even as global trends collapse.

Backfire wrote:

 Wayshuba wrote:

Considering GW pulled out all their heavy hitters in the last year and still managed a serious decline, the trends are not working in their favor that they will only decline by another 8%-11%. More than likely, we are going to witness an acceleration of losses from this point forward. When you look at performance just since 2012, GW is down 14% on previous sales growth (going from just over 6% in 2012 to -8% in 2014). Already the last two years are showing this accelerating, and accelerating quickly.

The next year should show the decline continuing even further. At best, I would expect a 16% decline, more likely we'll be looking at 19%-24% decline in gross revenues.

Such a decline would be very extreme. Given that despite everything, their sales have been quite stable over the last decade (sans the LOTR bubble), it would seem unlikely they'd suddenly collapse so dramatically. Also, I disagree with the idea that GW has nothing "big" left to release - for starters, 7th edition 40k sales boost (if such thing happens) will mostly be including in 14-15 financials.

Far more likely is a slow drippling down of sales over the next 5-10 years if nothing dramatic happens (worldwide economic depression, complete makeover of the GW leadership & direction etc).

This is the point I keep bringing up, when the threshold is crossed is rarely is a slow decline spread out over a number of years. It is usually dramatic and quick. Sorry, but GW management is not only of the caliber to not prevent this from happening, but they appear to be doubling down on the strategy which has lead them to this point in the first place. I may be wrong, but unless GW can buck historical trends of companies at this point, the acceleration in revenue decline will happen at this point forward.

 Tannhauser42 wrote:
It's kind of sad, really. I've been playing GW games since 1995, almost 20 years. Over half of my life. I have fond memories of playing GW games through the years. I still enjoy playing 40K with my friends. I'm working on an Emperor's Children Legion army for 30K, I plan to start a 30K Mechanicum force as well. And to see the projections that GW may be gone in as soon as two years is, well, rather depressing. It's like when I read the end of the last Wheel of Time book, and realized I just came to the end of a book series that had been with me for over half of my life.

And it is completely within GW's means to prevent this from happening. But, I fear this is exactly what "Kirby and his Kronies" want: to ride the dividend and salary train as long as they can until it all goes under, the golden parachute deploys, and someone buys the stock up for cheap and GW becomes somebody else's problem.

Your avatar always makes me smile. And then want to go play Deadly Premonition and get some coffee fortunes.

"Zack, the coffee says "Gee Doubleyou". What could this mean?"

I think I have all the GW minis I want right now and sold off everything relevant. Now we play the waiting game.

 Kilkrazy wrote:
I agree. One of the key selling points of 40K and WHFB is how widely it is played.

Once that goes into reverse you get a situation where one of the key points is how many people are abandoning it for other games, and persuading potential new recruits to follow suit.

IDK if GW are at that point now, but I believe that they are close.

This should be of huge concern to GW. There are several games that I'd definitely be collecting, if there were a large enough playerbase for me to find a pick up game on my days off. If 40k loses that as a selling point, theyre done.

sand.zzz wrote:
There are several games that I'd definitely be collecting, if there were a large enough playerbase for me to find a pick up game on my days off.

Just build a matching pair/triad. When someone wants to play with you, you have all the necessary minis and stuff for both players.

Want to start Bolt Action? Just buy the rulebook, then two boxes of 1/72 infantry and one box of two tanks for each faction. Total cost, about $120, and you should have more than enough minis to run games that are 150% the standard size. The ruleset is quite easy to learn, most beginners "get it" by turn 3.

Wanna start DBA? Just have a look at my sig.
Then again, getting the rulebooks plus all the minis for three complete armies (with enough spare units to build a 4th standard-sized force) cost me something like $70. And then again, DBA fits into the "maybe hard to master, but damn easy to learn" sweet spot.

Problem is, you just can't do it for WHFB/40k. Even if you're willing to spend enough cash to build 2 or 3 armies (or already have them), you need to have "insiders" around you if you want to play a pick up game, because the ruleset is not beginner friendly at all.

I honestly think the main thing GW still has going for it is the seeming ignorance of a lot of 40k players that there are no alternatives or finding any and all reason(s) to dismiss a competitor because it's not identical to 40k.

 Wayshuba wrote:

Backfire wrote:

 Wayshuba wrote:

Considering GW pulled out all their heavy hitters in the last year and still managed a serious decline, the trends are not working in their favor that they will only decline by another 8%-11%. More than likely, we are going to witness an acceleration of losses from this point forward. When you look at performance just since 2012, GW is down 14% on previous sales growth (going from just over 6% in 2012 to -8% in 2014). Already the last two years are showing this accelerating, and accelerating quickly.

The next year should show the decline continuing even further. At best, I would expect a 16% decline, more likely we'll be looking at 19%-24% decline in gross revenues.

Such a decline would be very extreme. Given that despite everything, their sales have been quite stable over the last decade (sans the LOTR bubble), it would seem unlikely they'd suddenly collapse so dramatically. Also, I disagree with the idea that GW has nothing "big" left to release - for starters, 7th edition 40k sales boost (if such thing happens) will mostly be including in 14-15 financials.

Far more likely is a slow drippling down of sales over the next 5-10 years if nothing dramatic happens (worldwide economic depression, complete makeover of the GW leadership & direction etc).

This is the point I keep bringing up, when the threshold is crossed is rarely is a slow decline spread out over a number of years. It is usually dramatic and quick. Sorry, but GW management is not only of the caliber to not prevent this from happening, but they appear to be doubling down on the strategy which has lead them to this point in the first place. I may be wrong, but unless GW can buck historical trends of companies at this point, the acceleration in revenue decline will happen at this point forward.

Quite right, if anything the "71% chance of bankruptcy in 2 years prediction" is optimistic, as it is looking at statistics and perhaps a rough rundown. A few things to consider;

*The only reason GW is posting a profit is by ruthlessly cutting operations. They long ago stopped trimming fat and started hitting the muscle.

*They have fired the big guns by flooding the market with new sets, armies, codices, and editions. They still lost sales. They literally have nothing left to try.

*Despite transparency legislations, some of accounting is still fiscal fantasy. Some of this is of course properly needed to operate smoothly. (Such as accounting for depreciation of equipment as if it were a steady monthly expenditure.) But some of it can be pure hocus pocus; shifting losses by one department by creating expenditures in another. (They spent HOW much on the website? Really?)

TLDR/Translation; Profits are probably even Worse than they look on paper.

Therefore, IMO to have even a slim chance at surviving they would have to; phase out physical overhead (Toxic relationships with independent and online retailers makes this troublesome), cut prices and perhaps manufacturing costs, and ADVERTISE, ADVERTISE, ADVERTISE (through traditional means, social campaigns, and leveraging their IP) these are the bare minimum first steps, the steps Kirby makes clear in his preamble they have no intention of even considering.

Some of the comments in this report are downright disgusting - this pig is actually proud of the fact that he ignores and/or doesn't care about what his customers want. How can someone with that attitude attain such a high position of power in a company like that?

Like they all do, right place, right time, right friends.

I think it's fair to say a former taxman probably wouldn't have attained the Chair of a global, listed company on the balance of probability, he did spot the opportunity when GW nearly disappeared previously (yes folks, it almost happened before, no reason it can't happen again in the future) and now he owns the ball, everyone plays his game or he takes it home.

 Boggy Man wrote:

Quite right, if anything the "71% chance of bankruptcy in 2 years prediction" is optimistic, as it is looking at statistics and perhaps a rough rundown.

I'm sorry, it is complete fantasy that GW will go bankrupt in 2 years. There is zero chance for it. Zero. To go bankrupt, they'd have to run a signifant loss for more than a year. Given that they still made a healthy profit this year, it is very unlikely they will make a loss next year. If sales continue to decline, it's plausible they post a loss in 2016, and THAT might start a downward spiral which might bankrupt them in say, 3-4 years.
Who exactly is going to bankrupt them? They have almost no debt. No debt, no debtors. No debtors, no bankruptcy.

Companies that operate at a loss do tend to go out of business rather quickly, especially when share values drop significantly over consecutive years...

 Retrogamer0001 wrote:
Companies that operate at a loss do tend to go out of business rather quickly, especially when share values drop significantly over consecutive years...

GW does not operate at loss. Share value has no effect on bankruptcy: share value might drop in expectation of a bankruptcy. GW share, despite dropping after poor January report, is still pretty high, roughly at same it was in 2012. This tells us that the investors, while having lost some optimism about company's future financial performance, do not expect it go bankrupt anytime soon.

Even if Wayshuba is correct in his gloomy prediction and GW posts a loss next year, that STILL does not drive the company anywhere close to bankruptcy. Why? Because GW has cash, and even with a loss they still would have money on hand and don't have to take on debt to maintain their operation. A company which has both cash reserves and no debt is not that easy to drive under. Look at Nokia: mismanaged horribly for years, revenue shrank year after year, constantly posting a loss, share price plummeting to tiny fraction of former glory. Yet they were not actually anywhere close to bankruptcy, because the company had built up so strong financial position in its good years.

What COULD happen to GW in 2 years is that their revenue shrinks so bad, that investors lose confidence that the company could be turned around, shares plummet and somebody buys the company (which atm, is much too expensive). However, that is not the same as actual bankruptcy.

Backfire wrote:

 Boggy Man wrote:

Quite right, if anything the "71% chance of bankruptcy in 2 years prediction" is optimistic, as it is looking at statistics and perhaps a rough rundown.

I'm sorry, it is complete fantasy that GW will go bankrupt in 2 years. There is zero chance for it. Zero. To go bankrupt, they'd have to run a signifant loss for more than a year. Given that they still made a healthy profit this year, it is very unlikely they will make a loss next year. If sales continue to decline, it's plausible they post a loss in 2016, and THAT might start a downward spiral which might bankrupt them in say, 3-4 years.
Who exactly is going to bankrupt them? They have almost no debt. No debt, no debtors. No debtors, no bankruptcy.

Debt is a fallacy about bankruptcy. Wang Computer, for example, filed for bankruptcy protection on August 18, 1992 and had zero bank debt when they did so. But, like any business, they still had other obligations. GW has a series of costs required to operate the business - currently sitting at around £108m. If revenue declines much faster than costs can be cut, you can quickly end up in trouble if you cannot cut costs fast enough, nor recognize savings for 30 months after obtaining "exceptional" costs.. In addition, while they may not have bank debt, they have extremely hefty lease obligations with all their stores. How much of the £36m is attributed to that is unknown, but it can be just as crippling as debt.

Now for some quick math to show the point (Cos and Operating Expenses common in all scenarios):
With 12% decline over next year (the same YoY change as previous year): Gross Revenue (GR) £108.68m, Cost of Sales (£36m), Operating Expense (£71.4m), Est. Net Profit £870k
With 16% decline (which I think is best case scenario): GR: £ 103.74m, Net Loss (£3.6m) - Cash on Hand currently £17.5m - remaining £13.9m
With 24% decline GR: £93.86m, Net Loss (£13.5m) - cash on hand remaining £4m (not enough to make it through even next three months and therefore need to file bankruptcy protection)

As it is, GW moved 12 points down from previous years growth. That is with pulling out every heavy hitting product they have. 19%-24% is a VERY likely scenario over the next year and 16% would be a best case. I personally am betting on the former, and thus why I say they are less than two years to complete implosion.

As an aside, I did these exact type of studies for companies I worked with for over 25 years. Worst I ever missed on my predictions was 3%. Not that it is worth anything, but at almost 50 years old, I have seen this case one too many times to count to feel I am that wrong about this.

Backfire wrote:

 Boggy Man wrote:

Quite right, if anything the "71% chance of bankruptcy in 2 years prediction" is optimistic, as it is looking at statistics and perhaps a rough rundown.

I'm sorry, it is complete fantasy that GW will go bankrupt in 2 years. There is zero chance for it. Zero. To go bankrupt, they'd have to run a signifant loss for more than a year. Given that they still made a healthy profit this year, it is very unlikely they will make a loss next year. If sales continue to decline, it's plausible they post a loss in 2016, and THAT might start a downward spiral which might bankrupt them in say, 3-4 years.
Who exactly is going to bankrupt them? They have almost no debt. No debt, no debtors. No debtors, no bankruptcy.

They have no debt but huge operating costs, which will cause them problems if they can't cut costs faster than the decline I revenue. It won't take much more of a drop for them to lose money. 15% would likely do it.