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2015/01/16 23:02:59
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
MWHistorian wrote: Your store sounds pretty special. I'm glad you're using it as a basis for every other store around. Also, you didn't have to buy the 3rd edition rules. They're free online. My store's more like what the others have said. WMH players have several games and the store owners push demo games and leagues to get new players in. We just finished a WMH leage and several people (including new players) bought some stuff to fill in gaps in their lists. (not to mention paints and supplies to finish their armies.)
And one more thing....you actually want a game to continue fleecing you and forcing you to buy stuff instead of buying what you want when you want? I guess customers get the game they deserve.
I don't consider buying something that I want being fleeced. I consider a new miniature something new to enjoy -- model, paint, and play -- not an obligation. When I go to my store, I want something NEW to play with, perhaps because I have a short attention span, and my scattergunners from last year just don't excite me anymore.
When I bought my Xbox, I expected to buy new games for new content. When I play 40k, I expect to buy new models and expansions for content. I expect to pay money for that. When I play Xwing, pretty much, I have no expectation of buying anything for a while. By the way, I paid for the infinity rules because I like a nice copy of it -- the same reason I buy a CSM codex. I don't feel fleeced by either. My point was just that the store staff thought it was in the box set, and it wasn't. There have only been two times I've ever felt fleeced by GW in 30 years: with 7th edition core rules, because it came so close to 6th, and with Codex Imperial Knights because it has 6 pages of rules in a $50 book (and not even much artwork) >.< But I actually wasn't fleeced on Codex IK, because I ended up buying a used one for $25 Ironically, the original buyer simply photocopied it hahaha.
I'm not trying to promote one game over another. If you like xwing and want to play it ad infinitum, and buy one new $100 game a year, all the power to you. I'm just saying that in my stores (plural, every one of 4 that sell GW and PP), GW has better product prominence because people who get hooked on GW spend more money for less effort to the store. Plus, all the really big spenders ($10k+ per year) are GW or historical buffs. There are no huge customers primarily into PP or Mantis or Infinity, because there just isn't enough product to make one faction a collectible -- though PP is getting there... sort of.
This message was edited 2 times. Last update was at 2015/01/16 23:19:59
2015/01/16 23:28:56
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
I think part of the problem with 40k is that table top wargames become very bloated when you just keep adding more and more stuff to it, the last time 40k was consolidated was 2nd -> 3rd, it's way more cumbersome now than it was in 2nd. If you just keep growing and growing a game without ever consolidating rules then you get the bloated mess we have and it becomes harder to tighten it up if you wanted to do that. Obviously 40k also has the problem that it's badly written.
People largely don't want shifting ground when it comes to a table top wargame. Models take considerable time to assemble and paint and they can be very expensive. People largely also don't want the game to just keep growing in size.
I tend to be of the opinion that GW should have expanded their scope to more side games and product tie ins with their popular IP's rather than doubling down and just releasing something new for 40k every single month. It's just not sustainable.
2015/01/17 00:04:04
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
ClockworkZion wrote: The "customer should continue to buy stuff" business model is the same one MtG is primarily built on.
It's honestly a pretty common business model.
The problem is that with GW it's not so much 'buy more stuff' it's 'buy more stuff you pig fethers!'
MtG at least gives you a reach around when they leave your ass in tatters.
Thats the best analogy I've ever heard. Exalted.
Automatically Appended Next Post:
ClockworkZion wrote: The "customer should continue to buy stuff" business model is the same one MtG is primarily built on.
It's honestly a pretty common business model.
There's quite a big difference between other companies' "you're gonna have to buy one or two things to remain top tier, but you're still in good shape if you want to stay put" and GWs "Oh, so you wanna be even remotely competitive? Well then you're gonna have buy two or more of these $70 giant kits and probably 3 or more boxes of these new units. Oh and thats on top of the overpriced new codex. Will that be cash or credit?"
This message was edited 1 time. Last update was at 2015/01/17 00:07:11
GW: "We do no demographic research, we have no focus groups, we do not ask the market what it wants"
2015/01/17 00:31:02
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
ClockworkZion wrote: The "customer should continue to buy stuff" business model is the same one MtG is primarily built on.
It's honestly a pretty common business model.
The problem is that with GW it's not so much 'buy more stuff' it's 'buy more stuff you pig fethers!'
MtG at least gives you a reach around when they leave your ass in tatters.
LOL. I like that
In defense of MtG, I spent a solid $8,000+ on the game, but I got much more than that when I sold out several years later. In 2014, I found an old playing deck that I forgot to include (honest mistake!) when I sold all my cards. I got almost a thousand dollars for... six cards in the deck. And that's at half Ebay prices (just sold them at FLGS for whatever they offered).
Ferrum_Sanguinis wrote: There's quite a big difference between other companies' "you're gonna have to buy one or two things to remain top tier, but you're still in good shape if you want to stay put" and GWs "Oh, so you wanna be even remotely competitive? Well then you're gonna have buy two or more of these $70 giant kits and probably 3 or more boxes of these new units. Oh and thats on top of the overpriced new codex. Will that be cash or credit?"
In fairness, though, there are plenty of very stable top tier builds. Wave Serpents, Bikespam, CentStar, Riptides -- to take a few examples -- have all been solid competitors since the models were out, and can't be improved upon buy buying more stuff.
In addition, there have been many models produced that don't need to be purchased at all -- for example, just from the last batch: Blood Angels Tacticals, Assault Terminators, and Librarian. Really, the only reason to buy them is because they're pretty (or you don't own those models). All the Dark Eldar models are pretty much meh (Haemonculous, Wracks, Succubus, Archon, etc.) or easily kit-bashable.
The only model that I've felt "compelled" to include as something that's too good to not have are Imperial Knights. I've bought two, and actually, I almost never play them, because I don't like how they look :\ They are particularly egregious because they are extremely expensive ($150 range), and very good for the point value. And there are awesome FW variants (like Cerastus Knight Castigator) that are really nice on a table (functionally)... but really, really expensive (170 GBP, plus all the shippoing crap, IIRC).
I buy new models from GW mostly because they're cool models (like Scions, Wall of Martyrs, Treeman Ancient) -- and then I look for an excuse to play them.
This message was edited 1 time. Last update was at 2015/01/17 00:33:56
2015/01/17 00:41:31
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
DEFINITION OF 'FINANCIAL DISTRESS'
A condition where a company cannot meet or has difficulty paying off its financial obligations to its creditors. The chance of financial distress increases when a firm has high fixed costs, illiquid assets, or revenues that are sensitive to economic downturns.
Trailing Twelve Months (TTM) ended in Sep. 2014:
Total Assets was $144,928 Mil.
Total Current Assets was $40,516 Mil.
Total Current Liabilities was $45,232 Mil. Retained Earnings was $7,733 Mil.
Pretax Income was -837.369456285 + 669.949609506 + -1135.87062732 + 867.668664218 = $-436 Mil. Interest Expense was -56.2900683915 + -62.8240036291 + -1740.63904632 + -2307.08486372 = $-4,167 Mil.
Revenue was 17700.7084897 + 17733.2605677 + 18235.7729138 + 23321.2739223 = $76,991 Mil.
Market Capitalization (Today) was $24,088 Mil.
Total Liabilities was $123,641 Mil.
I don't know what else to call it when your liabilities exceed your assets......They're eating through their savings at a prodigious rate (sound like another company we know?)
*I changed the text color above to call out what I'm referencing below in my statement.
According to their audited financial results, their Net Assets (Total Assets - Total Liabilities) = 49,765. That would indicate their assets exceed their liabilities. In fact, their current assets exceed their current liabilities by almost double (aka current ratio aka liquidity ratio). This would indicate GW is very liquid because it has the ability to pay its obligations. In addition, it also has the ability to pay its commitments noted in Note 12 which are not identified in the financial statements. Refer to the balance sheet on page 5 and footnote 12 on page of the mid year financial statements.
Also, when did they acquire debt? I think I missed the memo and didn't see it as a subsequent event in their financial statements. I'm referencing this per your interest Expense calculation above. Interest expense should be broken out as a separate item on their P&L and its not listed. Its broken out so you can get a true picture of operations ie - EBITDA. EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization. This provides the reader with a "true" sense of earnings from operations as the other expenses are not directly related to operations (interest is derived from debt, income taxes are based on earnings not operations, depreciation and amortization are based on capitalized assets in which cash may have been spent several years ago and in the current year are non-cash expenses). In addition, I don't see any LT debt or capital leases on the Company's Balance Sheet. How are they paying $4.2MM in interest charges?
When I look at the Company's health, I generally like to look at their statement of cash flows because it gives me a sense of what is happening with the Company. It shows what they are spending their money on and reconciles the change in cash between the periods (on an annual basis). GW is still a healthy company because they have the cash reserves and cash flow to maintain status quo. I'd like to see them take more action and I do participate in elections the Company's elections though I don't have enough skin in the game to matter when compared to the rest of the Investors. If you want to see GW change, buy their stock and create a block of investors and demand change. The only way anyone on this board can make it happen is by working within their system. Buy their shares and threaten a takeover, be that activist investor they don't like. Management won't take you seriously until you're sitting across the table from them and have support from their investors.
Umm. The info I quoted was for Sony as it was being argued that Sony was/is not in financial distress; apparently, by your statement, they are not regardless of the CFO's statement that they are hemorrhaging cash ($1.2billion abouts).
Anywho, since it's topical and all, let's examine GW using your definition of health.
Games Workshop Group PLC's EBITDA per share for the six months ended in Nov. 2014 was £0.37. Its EBITDA per share for the trailing twelve months (TTM) ended in Nov. 2014 was £0.70. During the past 12 months, the average EBITDA per Share Growth Rate of Games Workshop Group PLC was -32.50% per year. During the past 3 years, the average EBITDA per Share Growth Rate was -4.40% per year. During the past 5 years, the average EBITDA per Share Growth Rate was -2.00% per year. During the past 10 years, the average EBITDA per Share Growth Rate was 8.10% per year.
So, is -32.50% in the past year healthy? According to EBITDA, GW has been in a slide for the past 5+ years which appears to be accelerating.
One thing that I look at in a retail stock is the inventory to revenue ratio.
Games Workshop Group PLC's inventory to revenue ratio for the quarter that ended in Nov. 2014 increased from May. 2014 (0.14) to May. 2014 (0.15)
An increase in inventory to revenue ratio from one quarter to the next indicates that one of the following is happening:
1. investment in inventory is growing more rapidly than revenue
2. revenue are dropping
No matter which situation is causing the problem, an increase in the inventory to revenue ratio may signal an oncoming cash flow problem.
Is GW going to implode tomorrow? No, not even close. They're making money, albeit less than before, and turning over inventory, albeit less than before. From an examination of the numbers it looks almost like a controlled slide down. The financials are in great shape and the books look good but the company is a couple of more bad halfs from being faced with a decision to cut dividends or buy product to sell.
Sorry, when you post another Company's financial information in a thread about GW and then start talking financial distress, you may want to label it as "SONY". I read that and was trying to figure out what you were smoking because none of those numbers jive with the financial statements I was reading. Now that I know they are Sony's, no worries.
I'm an ex-auditor and I've put together Financial Statements for the better part of the last decade. I'm only relaying my thoughts based on my experiences as a public accountant and internal auditor and what has worked for me when I invest my own money. My reference to the Cash Flow Statement was only meant to comment on what I think is important when making investment decisions because I feel that gives the investor a glimpse at how the Company is spending their money. EBITDA is useful when trying to see how well Companies are operating as it shows cash flow and removes non-cash and non-operating expenses. Based on some of the comments in this thread, I'm trying to show you why I am making the statement and my thought process because I'm holding a counter point to the majority opinion.
To address your next comment, I would expect to see GW drop back to where they were several years when they were not riding the Lord of the Rings horse. I would imagine they have to scale back to where they were and still have some fat to trim from shrinking to get back in line with where they should be. In fact, they are back to where they were in 2010 which is about where they were before the Hobbit bubble which may have attracted some new Lord of the Rings players to account for the bump the Company saw during 2011-2013. My expectation would be the Company will move to be in line with their revenue & profit back at that point in time as there were no LotR movies and GW had to really push the game rather than let the movies do their thing. I really think their Company is managed quite well as they continue to operate without debt financing. The Company really supports itself and flushes the cash right back to the owners which is the entire point of any business to begin with. Do I think they could do more? Heck yes. Do I think their management team is running the business into the ground? No. Do I think they are in distress? No - I see they continue to be able to keep their lights on, pay their vendors, pay their employees, and pay their owners without having to finance it.
Based on what I saw with the Smaug model, GW sold some 200 of them in 24 hours. At $500 a pop, that is what $100,000 in revenue in one day? I'd imagine GW wants to continue to court the LotR customer base but they need to figure out how to get them to bite because sales would indicate they have the potential to impact GW's bottom line in a good way. Though, as we all have seen with the limited edition game, if they are not happy, it will sit on the shelves of our LGS.
The growth in inventory can be due to a number of things such as:
1 - A rise in the cost to produce goods (plastic, labor, artists, utilities, etc.)
2 - An increase in the number retail locations. If you have more locations to maintain, you need to make more to put into your lines of distribution. Since GW distributes their own product, it needs to be in the general geographic location as their intended consumer.
3 - An increase in expected demand for a group of products. Since End of Times is in full swing near the cut off period, some of the variance may be due to a specific release (EOT - Elves or the Glott Bros or space marines: red being released in the next couple of weeks). In addition, they may predict they may need additional product due Americans shopping over the Thanksgiving weekend. That would at least address an increase over the last 6 months.
4 - Reviewing the Annual Report, there is a YOY decrease in total inventory due to the fact reduced the raw materials on hand. This would indicate they are more apt to see inventory fluctuate due to increased in raw materials (refer back to item 1).
For the reasons above, I wouldn't anticipate a build up in inventory to equate to a loss of sales.
*Edited* I find it easier to make changes to my post when I see how it will appear when its posted. Also, I took a potty break and saw I had not completed a thought and had an unfinished sentence.
This message was edited 3 times. Last update was at 2015/01/17 01:07:00
[/sarcasm]
2015/01/17 01:39:46
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
@boyd - this is contrary to the Internet method of analysis, where any of the following indicate that a company is distressed:
- If I don't like the company - If I don't like the company's products - If the company doesn't make me feel valued - If the company is making less money than it did at any point in history - If the company's products are too expensive - If the company's products are too cheap
Just pick any aspect of financial statements that I don't like and it will prove that the company is in imminent threat of insolvency. This will be reinforced by some analyst, somewhere, who thinks so too. In contrast, any company must surely be a "BUY NAO!" if any of the following are true (note that these rules supersede the above):
- If I like the company, nothing else matters. - If I like any of the company's products, nothing else matters. - If the company makes me feel special, nothing else matters.
Even if the company has billions of dollars banked, and is making billions of dollars every quarter, surely it is a doomed company and should just give up now if none of the above three are true. Because after all, if this is so, the world will work the way that I want it to and my sense of influence over the cosmos will be reinforced!
Like Microsoft. Surely, they are a distressed company. RIGHT?? Xbox? Doomed. Surface? Doomed. Phone? Doomed. Windows? Doomed. Office? Doomed! Sony? DOOMED!!!
Why would anyone care if these companies have enough money, revenue, and cashflow, and reliable userbase, to experiment with new things, and to mess things up here and there without significant consequence? Surely these things have nothing to do with a company's well being. It's all about Kickstarter campaigns and bright-eyed, bushy tailed Davids in a world of Goliaths.
Whenever people talk about companies that aren't doing very well, and that they are therefore *terrible* investments that no intelligent person or institution would touch, I like to just cough out... Apple... Netflix.
This message was edited 2 times. Last update was at 2015/01/17 01:43:34
2015/01/17 01:57:58
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
ClockworkZion wrote: The "customer should continue to buy stuff" business model is the same one MtG is primarily built on.
It's honestly a pretty common business model.
A couple of differences with magic though:
1 - its ready to go right out of the box
2 - the buy-in cost is ridiculously cheap compared to gw (last year i bought 2 of the new starter decks to show/play with a friend, it cost me $50 in total which might buy me a 10-man squad from gw these days, might)
3 - the core rules are pretty stable
4 - the older stuff is often still useful and not underpowered compared to the new stuff (like an older sengir vampire compared to the revised ones)
5 - storage requirements are way smaller
6 - the company doesn't seem to go after it's own customers and indie retailers
The customer should continue to buy stuff is a valid business model, but the market and execution can be very different and not always suitable to that.
2015/01/17 02:12:35
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
ClockworkZion wrote: The "customer should continue to buy stuff" business model is the same one MtG is primarily built on.
It's honestly a pretty common business model.
A couple of differences with magic though: 1 - its ready to go right out of the box 2 - the buy-in cost is ridiculously cheap compared to gw (last year i bought 2 of the new starter decks to show/play with a friend, it cost me $50 in total which might buy me a 10-man squad from gw these days, might) 3 - the core rules are pretty stable 4 - the older stuff is often still useful and not underpowered compared to the new stuff (like an older sengir vampire compared to the revised ones) 5 - storage requirements are way smaller 6 - the company doesn't seem to go after it's own customers and indie retailers
The customer should continue to buy stuff is a valid business model, but the market and execution can be very different and not always suitable to that.
They're similar in that both are cheap to get into, and *ridiculously expensive* to collect if you love them. There's nothing wrong with playing with a starter box.
Sengir vampire is not a great example of a great card though. Try Mox stones, black lotus, diamond valley, dual land, time walk.... Yeah, the cards that allowed you to win the game without your opponent ever getting to even play In every release, there are a few jewels. If you must keep up with the collection, be prepared to pay a *lot* of money.
There are tons of differences between MtG and 40k, and I think MtG is a better business, and a better managed business. Still, their similarities are basically that they encourage their customers to keep spending money. The whole framework is "buy in, buy more". Board games basically are, "Buy in, Play, Buy Next". I think the board game strategy is a losing one, long term (just my opinion) -- because eventually people become less interested in picking up something new, and disenfranchised with or can't find play partners for the old. It also isn't possible to have a high purchase velocity with board games, because they are by nature not really collectible.
WMH is definitely in the buy in/buy more camp, but their escalation to date has been somewhat gentler, and the model count is lower. Make no mistake though, their business model relies on customers to upgrade their armies and buy the new, bigger stuff. From the Borka's to Mountain Kings to Collossals, there are larger and more expensive units than the original game envisioned. At some point, perhaps WMH too will decide that to make more money, they wlll decide to further escalate the units in the game (either bigger models, more models, or both).
Personally, I get more out of 40k because family commitments mean I can't game a ton, but I can still squirrel away hobby time. I like 'em all, though!
This message was edited 1 time. Last update was at 2015/01/17 02:18:55
2015/01/17 02:21:06
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
ClockworkZion wrote: The "customer should continue to buy stuff" business model is the same one MtG is primarily built on.
It's honestly a pretty common business model.
A couple of differences with magic though:
1 - its ready to go right out of the box
2 - the buy-in cost is ridiculously cheap compared to gw (last year i bought 2 of the new starter decks to show/play with a friend, it cost me $50 in total which might buy me a 10-man squad from gw these days, might)
3 - the core rules are pretty stable
4 - the older stuff is often still useful and not underpowered compared to the new stuff (like an older sengir vampire compared to the revised ones)
5 - storage requirements are way smaller
6 - the company doesn't seem to go after it's own customers and indie retailers
The customer should continue to buy stuff is a valid business model, but the market and execution can be very different and not always suitable to that.
I won't claim it's exactly the same, just that it's not an uncommon business strategy.
And old with 40k doesn't mean bad. A lot of the game is built on old stuff (and sometimes old stuff gets overbuffed).
As for the indie retailers GW has gone after, it's been pretty limited to online retailers only to protect brick and mortar indies who can't compete with stores that are selling world wide at such a deep discount. It was hurting the indies and thus hurt GW hence why they did what they did.
This message was edited 1 time. Last update was at 2015/01/17 02:23:05
2015/01/17 06:00:49
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
DEFINITION OF 'FINANCIAL DISTRESS'
A condition where a company cannot meet or has difficulty paying off its financial obligations to its creditors. The chance of financial distress increases when a firm has high fixed costs, illiquid assets, or revenues that are sensitive to economic downturns.
Trailing Twelve Months (TTM) ended in Sep. 2014:
Total Assets was $144,928 Mil.
Total Current Assets was $40,516 Mil.
Total Current Liabilities was $45,232 Mil. Retained Earnings was $7,733 Mil.
Pretax Income was -837.369456285 + 669.949609506 + -1135.87062732 + 867.668664218 = $-436 Mil. Interest Expense was -56.2900683915 + -62.8240036291 + -1740.63904632 + -2307.08486372 = $-4,167 Mil.
Revenue was 17700.7084897 + 17733.2605677 + 18235.7729138 + 23321.2739223 = $76,991 Mil.
Market Capitalization (Today) was $24,088 Mil.
Total Liabilities was $123,641 Mil.
I don't know what else to call it when your liabilities exceed your assets......They're eating through their savings at a prodigious rate (sound like another company we know?)
*I changed the text color above to call out what I'm referencing below in my statement.
According to their audited financial results, their Net Assets (Total Assets - Total Liabilities) = 49,765. That would indicate their assets exceed their liabilities. In fact, their current assets exceed their current liabilities by almost double (aka current ratio aka liquidity ratio). This would indicate GW is very liquid because it has the ability to pay its obligations. In addition, it also has the ability to pay its commitments noted in Note 12 which are not identified in the financial statements. Refer to the balance sheet on page 5 and footnote 12 on page of the mid year financial statements.
Also, when did they acquire debt? I think I missed the memo and didn't see it as a subsequent event in their financial statements. I'm referencing this per your interest Expense calculation above. Interest expense should be broken out as a separate item on their P&L and its not listed. Its broken out so you can get a true picture of operations ie - EBITDA. EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization. This provides the reader with a "true" sense of earnings from operations as the other expenses are not directly related to operations (interest is derived from debt, income taxes are based on earnings not operations, depreciation and amortization are based on capitalized assets in which cash may have been spent several years ago and in the current year are non-cash expenses). In addition, I don't see any LT debt or capital leases on the Company's Balance Sheet. How are they paying $4.2MM in interest charges?
When I look at the Company's health, I generally like to look at their statement of cash flows because it gives me a sense of what is happening with the Company. It shows what they are spending their money on and reconciles the change in cash between the periods (on an annual basis). GW is still a healthy company because they have the cash reserves and cash flow to maintain status quo. I'd like to see them take more action and I do participate in elections the Company's elections though I don't have enough skin in the game to matter when compared to the rest of the Investors. If you want to see GW change, buy their stock and create a block of investors and demand change. The only way anyone on this board can make it happen is by working within their system. Buy their shares and threaten a takeover, be that activist investor they don't like. Management won't take you seriously until you're sitting across the table from them and have support from their investors.
Umm. The info I quoted was for Sony as it was being argued that Sony was/is not in financial distress; apparently, by your statement, they are not regardless of the CFO's statement that they are hemorrhaging cash ($1.2billion abouts).
Anywho, since it's topical and all, let's examine GW using your definition of health.
Games Workshop Group PLC's EBITDA per share for the six months ended in Nov. 2014 was £0.37. Its EBITDA per share for the trailing twelve months (TTM) ended in Nov. 2014 was £0.70. During the past 12 months, the average EBITDA per Share Growth Rate of Games Workshop Group PLC was -32.50% per year. During the past 3 years, the average EBITDA per Share Growth Rate was -4.40% per year. During the past 5 years, the average EBITDA per Share Growth Rate was -2.00% per year. During the past 10 years, the average EBITDA per Share Growth Rate was 8.10% per year.
So, is -32.50% in the past year healthy? According to EBITDA, GW has been in a slide for the past 5+ years which appears to be accelerating.
One thing that I look at in a retail stock is the inventory to revenue ratio.
Games Workshop Group PLC's inventory to revenue ratio for the quarter that ended in Nov. 2014 increased from May. 2014 (0.14) to May. 2014 (0.15)
An increase in inventory to revenue ratio from one quarter to the next indicates that one of the following is happening:
1. investment in inventory is growing more rapidly than revenue
2. revenue are dropping
No matter which situation is causing the problem, an increase in the inventory to revenue ratio may signal an oncoming cash flow problem.
Is GW going to implode tomorrow? No, not even close. They're making money, albeit less than before, and turning over inventory, albeit less than before. From an examination of the numbers it looks almost like a controlled slide down. The financials are in great shape and the books look good but the company is a couple of more bad halfs from being faced with a decision to cut dividends or buy product to sell.
Sorry, when you post another Company's financial information in a thread about GW and then start talking financial distress, you may want to label it as "SONY". I read that and was trying to figure out what you were smoking because none of those numbers jive with the financial statements I was reading. Now that I know they are Sony's, no worries.
I'm an ex-auditor and I've put together Financial Statements for the better part of the last decade. I'm only relaying my thoughts based on my experiences as a public accountant and internal auditor and what has worked for me when I invest my own money. My reference to the Cash Flow Statement was only meant to comment on what I think is important when making investment decisions because I feel that gives the investor a glimpse at how the Company is spending their money. EBITDA is useful when trying to see how well Companies are operating as it shows cash flow and removes non-cash and non-operating expenses. Based on some of the comments in this thread, I'm trying to show you why I am making the statement and my thought process because I'm holding a counter point to the majority opinion.
To address your next comment, I would expect to see GW drop back to where they were several years when they were not riding the Lord of the Rings horse. I would imagine they have to scale back to where they were and still have some fat to trim from shrinking to get back in line with where they should be. In fact, they are back to where they were in 2010 which is about where they were before the Hobbit bubble which may have attracted some new Lord of the Rings players to account for the bump the Company saw during 2011-2013. My expectation would be the Company will move to be in line with their revenue & profit back at that point in time as there were no LotR movies and GW had to really push the game rather than let the movies do their thing. I really think their Company is managed quite well as they continue to operate without debt financing. The Company really supports itself and flushes the cash right back to the owners which is the entire point of any business to begin with. Do I think they could do more? Heck yes. Do I think their management team is running the business into the ground? No. Do I think they are in distress? No - I see they continue to be able to keep their lights on, pay their vendors, pay their employees, and pay their owners without having to finance it.
Based on what I saw with the Smaug model, GW sold some 200 of them in 24 hours. At $500 a pop, that is what $100,000 in revenue in one day? I'd imagine GW wants to continue to court the LotR customer base but they need to figure out how to get them to bite because sales would indicate they have the potential to impact GW's bottom line in a good way. Though, as we all have seen with the limited edition game, if they are not happy, it will sit on the shelves of our LGS.
The growth in inventory can be due to a number of things such as:
1 - A rise in the cost to produce goods (plastic, labor, artists, utilities, etc.)
2 - An increase in the number retail locations. If you have more locations to maintain, you need to make more to put into your lines of distribution. Since GW distributes their own product, it needs to be in the general geographic location as their intended consumer.
3 - An increase in expected demand for a group of products. Since End of Times is in full swing near the cut off period, some of the variance may be due to a specific release (EOT - Elves or the Glott Bros or space marines: red being released in the next couple of weeks). In addition, they may predict they may need additional product due Americans shopping over the Thanksgiving weekend. That would at least address an increase over the last 6 months.
4 - Reviewing the Annual Report, there is a YOY decrease in total inventory due to the fact reduced the raw materials on hand. This would indicate they are more apt to see inventory fluctuate due to increased in raw materials (refer back to item 1).
For the reasons above, I wouldn't anticipate a build up in inventory to equate to a loss of sales.
Sorry for any confusion but as I was responding to another poster about the health of Sony (his point); it was an ongoing conversation from a couple of previous pages.
I dabble in the stock market so do not have nearly the same experience as yourself so I'll defer to your comments and simply provide some additional data for consideration.
1. EBITDA Per Share
Games Workshop Group PLC Annual Data
EBITDA_per_share
May05------May06----------May07-------May08-------May09-------May10--------May11-------May12-------May13-------May14
0.75----------0.47-----------0.28----------0.40---------0.62----------0.85----------0.80----------0.94---------0.96----------0.70
For the reasons above, I wouldn't anticipate a build up in inventory to equate to a loss of sales.
I would though, especially when you take into account an increase in the inventory of finished goods whereas you would be talking about the inventory of raw goods.
Finished goods:
Games Workshop Group PLC's annual finished goods declined from May. 2012 (£7.4 Mil) to May. 2013 (£7.0 Mil) but then increased from May. 2013 (£7.0 Mil) to May. 2014 (£7.6 Mil).
We can see that between 2012 and 2013, the EBITDA per share improved while inventories of finished goods being held declined, indicating product being moved. The between 2013 and 2014 EBITDA declined and inventories of finished goods rose.
Then we have the inventory of raw materials declining as there is less demand for finished product:
Games Workshop Group PLC's annual raw materials declined from May. 2012 (£0.9 Mil) to May. 2013 (£0.5 Mil) and declined from May. 2013 (£0.5 Mil) to May. 2014 (£0.2 Mil).
In full disclosure, I owned a fair amount of GW stock until this time last year when my early-warning system auto-sold my stock when it dropped 20% in one day, precipitating another 5% drop when I bowed out (low-volume, small-cap stocks can be scary easy to influence share price). I am not predicting the end of GW. My point has been, for the past several pages, that it is entirely possible for them to face some tough decisions in the near future if they are unable to pull out of their current slump. Again, they're currently a healthy company with great-looking financials.
As to the Smog comment. $100,000 in one day would be nice for a tiny company but GW has a multi-national presence; one would hope that they could do better, ideally over time because sustained growth is what is needed not selling everything that they're going to sell within a few days' time.
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Talys wrote: @boyd - this is contrary to the Internet method of analysis, where any of the following indicate that a company is distressed:
- If I don't like the company
- If I don't like the company's products
- If the company doesn't make me feel valued
- If the company is making less money than it did at any point in history
- If the company's products are too expensive
- If the company's products are too cheap
Just pick any aspect of financial statements that I don't like and it will prove that the company is in imminent threat of insolvency. This will be reinforced by some analyst, somewhere, who thinks so too. In contrast, any company must surely be a "BUY NAO!" if any of the following are true (note that these rules supersede the above):
- If I like the company, nothing else matters.
- If I like any of the company's products, nothing else matters.
- If the company makes me feel special, nothing else matters.
Even if the company has billions of dollars banked, and is making billions of dollars every quarter, surely it is a doomed company and should just give up now if none of the above three are true. Because after all, if this is so, the world will work the way that I want it to and my sense of influence over the cosmos will be reinforced!
Like Microsoft. Surely, they are a distressed company. RIGHT?? Xbox? Doomed. Surface? Doomed. Phone? Doomed. Windows? Doomed. Office? Doomed! Sony? DOOMED!!!
Why would anyone care if these companies have enough money, revenue, and cashflow, and reliable userbase, to experiment with new things, and to mess things up here and there without significant consequence? Surely these things have nothing to do with a company's well being. It's all about Kickstarter campaigns and bright-eyed, bushy tailed Davids in a world of Goliaths.
Whenever people talk about companies that aren't doing very well, and that they are therefore *terrible* investments that no intelligent person or institution would touch, I like to just cough out... Apple... Netflix.
You're very dogged about this whole thing. This all started over a comment on how they could become financially distressed, not are, could become. You conflated this into a pithy comment about Sony, I showed how the CFO of Sony even said they were distressed and you never responded instead choosing to make passive aggressive comments as above.
FWIW, I've owned GW stock, I buy GW products, in fact I have a full collection of the Knights (I'm a sucker for big, stompy robots). I don't want to see them go away but I'm also not going to pretend that they are the superman of companies and completely bulletproof. They're a small fish in a very big pond sadly being run by some people with egos larger than their bank accounts justify.
This message was edited 3 times. Last update was at 2015/01/17 06:09:36
Six mistakes mankind keeps making century after century: Believing that personal gain is made by crushing others; Worrying about things that cannot be changed or corrected; Insisting that a thing is impossible because we cannot accomplish it; Refusing to set aside trivial preferences; Neglecting development and refinement of the mind; Attempting to compel others to believe and live as we do
2015/01/17 06:31:52
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
The problem with the £100,000 sales of Smaug in a day theory is that GW actually need to sell about £300,000 a day just to break even.
No company can do that by selling three new awesome limited special item kits every day of the year. You need a good baseline range that keeps the company afloat, then the special items are icing on the cake. (To mix metaphors.)
Smaug was the kind of prestige kit that GW can point to and say they do awesome prestige fantasy kits. But actually GW need to sell games with rules, codexes and armies. That is where they appear to be in decline.
@agnosto - of course GW could become distressed. I don't know how you missed the snark, as that specific post was obviously made in jest, although there is a valid point in that just because you don't like a company or it isn't doing as well as it could doesn't mean that it is distressed or likely to become distressed. Also, on the Internet, people have a tendency to confuse, "I wish they would die already" with "They're likely to die soon". On Internet forums and boards like this one, people rarely look at companies dispassionately as investment vehicles.
I don't think that GW is likely to become a distressed company (defined as being unable to meet financial obligations) in the foreseeable future. It has no debt, has cash on hand, its expenses are under control, and management is clearly willing to make cost-saving cuts, sparing no-one.
GW is much more likely to shrink; however, I say to that, "so what?". Its fans will still have a manufacturer, and other hobbyists and gamers will still have other choices. In the same way, frankly, if GW grew 20% every year for 10 years, I'd also say, "so what?". Neither really affects me, unless I'm actually unable to find people to play with, though I'm sure my hobby shop would prefer the latter. Notably, in 25+ years, I have never had a problem finding people to play 40k with.
I also don't believe that GW is so horribly managed as some others think. It is profitable, returns profits to stakeholders, and produces products that there is a market for. I don't personally need to feel listened to or valued any more than I do from Amazon, Microsoft, Apple, or Netflix. I don't feel personally offended by GW, but even if I did, it wouldn't change whether I think it's going to go under any time soon, because lots of companies that o don't think much of stay in business for a very long time.
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Kilkrazy wrote: The problem with the £100,000 sales of Smaug in a day theory is that GW actually need to sell about £300,000 a day just to break even.
No company can do that by selling three new awesome limited special item kits every day of the year. You need a good baseline range that keeps the company afloat, then the special items are icing on the cake. (To mix metaphors.)
Smaug was the kind of prestige kit that GW can point to and say they do awesome prestige fantasy kits. But actually GW need to sell games with rules, codexes and armies. That is where they appear to be in decline.
I believe that the point was that this was one model largely derided as ridiculously expensive, poor value, and unviable -- when actually, it did ok. Not that GW should produce Smaug-like models and nothing else.
His other point was that perhaps there is not so much a decline as we make it out to be, because all we're seeing is the LoTR wave fade (as the movies are done, and the last one was terrible). The real question should be, how much has 40k really declined -- comparing 40k numbers from now, to pre-LoTR, rather than GW now with GW then.
This message was edited 3 times. Last update was at 2015/01/17 11:02:38
2015/01/17 11:56:51
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
As for the indie retailers GW has gone after, it's been pretty limited to online retailers only to protect brick and mortar indies who can't compete with stores that are selling world wide at such a deep discount. It was hurting the indies and thus hurt GW hence why they did what they did.
If you go and ignore all the evidence that they do try and undermine the independents (including the brick and mortar onlys) sure. Like turning half their range direct only.
2015/01/17 12:23:10
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
Talys wrote: I believe that the point was that this was one model largely derided as ridiculously expensive, poor value, and unviable -- when actually, it did ok. Not that GW should produce Smaug-like models and nothing else.
They only made 200 globally so far so it's hardly an indication of anything.
The real question should be, how much has 40k really declined -- comparing 40k numbers from now, to pre-LoTR, rather than GW now with GW then.
Except we'll never get an answer to that question (beyond local level stuff of stores giving anecdotal evidence) so it's not really a useful question to ask.
2015/01/17 12:31:11
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
Talys wrote: The real question should be, how much has 40k really declined -- comparing 40k numbers from now, to pre-LoTR, rather than GW now with GW then.
Except we'll never get an answer to that question (beyond local level stuff of stores giving anecdotal evidence) so it's not really a useful question to ask.
You work with the data you have, not the data you wish you had.
Kirasu: Have we fallen so far that we are excited that GW is giving us the opportunity to spend 58$ for JUST the rules? Surprised it's not "Dataslate: Assault Phase"
AlexHolker: "The power loader is a forklift. The public doesn't complain about a forklift not having frontal armour protecting the crew compartment because the only enemy it is designed to face is the OHSA violation."
AlexHolker: "Allow me to put it this way: Paramount is Skynet, reboots are termination attempts, and your childhood is John Connor."
2015/01/17 13:37:20
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
Talys wrote: The real question should be, how much has 40k really declined -- comparing 40k numbers from now, to pre-LoTR, rather than GW now with GW then.
Except we'll never get an answer to that question (beyond local level stuff of stores giving anecdotal evidence) so it's not really a useful question to ask.
You work with the data you have, not the data you wish you had.
And if your data is insufficient and you can't obtain sufficient data you move on to more useful questions
2015/01/17 13:56:39
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
Talys wrote: The real question should be, how much has 40k really declined -- comparing 40k numbers from now, to pre-LoTR, rather than GW now with GW then.
Except we'll never get an answer to that question (beyond local level stuff of stores giving anecdotal evidence) so it's not really a useful question to ask.
You work with the data you have, not the data you wish you had.
And if your data is insufficient and you can't obtain sufficient data you move on to more useful questions
Actually, the data is there if you look at my recent posts. Post LOTR bubble, GW is a current slide per their publicly released numbers (EBITDA per share).
Anyone recall what happened in 2012/2013 for the spike there? 6th edition?
Disclaimer:
Again, I'm not saying that GW is in financial trouble, currently far from it; I'm saying that the data supports concern that they could continue to slide into oblivion if the course is not corrected. There are a number of internal and external factors that will determine how quickly or if at all this occurs but it's interesting to discuss and watch.
Six mistakes mankind keeps making century after century: Believing that personal gain is made by crushing others; Worrying about things that cannot be changed or corrected; Insisting that a thing is impossible because we cannot accomplish it; Refusing to set aside trivial preferences; Neglecting development and refinement of the mind; Attempting to compel others to believe and live as we do
2015/01/17 14:31:18
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
Talys wrote: The real question should be, how much has 40k really declined -- comparing 40k numbers from now, to pre-LoTR, rather than GW now with GW then.
Except we'll never get an answer to that question (beyond local level stuff of stores giving anecdotal evidence) so it's not really a useful question to ask.
You work with the data you have, not the data you wish you had.
And if your data is insufficient and you can't obtain sufficient data you move on to more useful questions
Actually, the data is there if you look at my recent posts. Post LOTR bubble, GW is a current slide per their publicly released numbers (EBITDA per share).
Well we don't know explicitly any numbers for 40k, the numbers I've seen and what you've posted don't suggest any way you can separate the performance of 40k globally from the data we have on GW as a whole.
2015/01/17 14:39:09
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
Talys wrote: The real question should be, how much has 40k really declined -- comparing 40k numbers from now, to pre-LoTR, rather than GW now with GW then.
Except we'll never get an answer to that question (beyond local level stuff of stores giving anecdotal evidence) so it's not really a useful question to ask.
You work with the data you have, not the data you wish you had.
And if your data is insufficient and you can't obtain sufficient data you move on to more useful questions
Actually, the data is there if you look at my recent posts. Post LOTR bubble, GW is a current slide per their publicly released numbers (EBITDA per share).
Well we don't know explicitly any numbers for 40k, the numbers I've seen and what you've posted don't suggest any way you can separate the performance of 40k globally from the data we have on GW as a whole.
But we do know that it's their strongest product, as evidenced by the amount of support it receives vs the other two (sadly only two other products now).
Six mistakes mankind keeps making century after century: Believing that personal gain is made by crushing others; Worrying about things that cannot be changed or corrected; Insisting that a thing is impossible because we cannot accomplish it; Refusing to set aside trivial preferences; Neglecting development and refinement of the mind; Attempting to compel others to believe and live as we do
2015/01/17 14:50:08
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
Yeah we know it's their strongest product and probably has been for many years... still no way to extract it's specific performance from GW as a whole. We know that the 7th ed WHFB rulebook pulled in roughly 37% of what the 5th ed 40k book did over the first 3 years of sale of each one. Given the swings in revenue are more of the order of less than 10%, it's hard to say anything much about 40k specifically in the grand scheme of things.
We do know GW is falling in spite if releasing a lot of 40k stuff over the past couple of years, but even then it's a stretch to specifically say 40k is failing. It says GW's strategy is failing.
2015/01/17 14:56:12
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
Talys wrote: The real question should be, how much has 40k really declined -- comparing 40k numbers from now, to pre-LoTR, rather than GW now with GW then.
Except we'll never get an answer to that question (beyond local level stuff of stores giving anecdotal evidence) so it's not really a useful question to ask.
You work with the data you have, not the data you wish you had.
And if your data is insufficient and you can't obtain sufficient data you move on to more useful questions
Actually, the data is there if you look at my recent posts. Post LOTR bubble, GW is a current slide per their publicly released numbers (EBITDA per share).
Well we don't know explicitly any numbers for 40k, the numbers I've seen and what you've posted don't suggest any way you can separate the performance of 40k globally from the data we have on GW as a whole.
Actually, we do have explicit numbers. Andy Jones testified under oath in 2013 that Warhammer 40K accounted for more than 50% of GW's total revenue. This does not include Black Library, Forge World, licenses, White Dwarf, LoTR, Hobbit, Space Hulk, paints, hobby supplies, or anything else GW sells aside from 40K rulebooks and model kits.
So we can at the very least take that as a number as of August 2013. We also have sales volume data for the US disclosed in that same case. We also know the percentage of GW's revenue by region.
So saying that we don't have data on 40K is false.
Secondarily, it is a non-issue. Who cares what GW's 40K related revenue is if the company's total revenue and profit are declining? It would be an absurd coincidence if these drops in revenue/profit were completely unrelated to sales of a product line that makes up by now more than half of the company's total revenue. And even if it was true, again, who really cares. If GW can't stay in business, GW can't make 40K products. As an aside, it seems that at the very least Black Library revenue is going up.
And as for who is playing the game, anecdotal data is more valuable in that respect, because GW's 40K-related unit sales do not necessarily correlate to people playing the game. We have been seeing an increasing number of anecdotal accounts of declining participation in 40K and Fantasy. We have years of objective data from convention registrations and tournament entries that show declines in 40K participation across North America while overall attendance is on the rise and participation rates for WarmaHordes, X-Wing, Infinity, Flames of War, Bolt Action, etc. are increasing.
So it is pretty absurd to claim that there is no data. What one does is examine whatever data is available, both quantitative and qualitative, examine it for patterns, and make inferences. Overall, if you asked a Magic 8-Ball if participation in Warhammer 40K has been in decline, it would come up "Signs point to Yes" every time you shook it.
This message was edited 6 times. Last update was at 2015/01/17 15:01:31
Kirasu: Have we fallen so far that we are excited that GW is giving us the opportunity to spend 58$ for JUST the rules? Surprised it's not "Dataslate: Assault Phase"
AlexHolker: "The power loader is a forklift. The public doesn't complain about a forklift not having frontal armour protecting the crew compartment because the only enemy it is designed to face is the OHSA violation."
AlexHolker: "Allow me to put it this way: Paramount is Skynet, reboots are termination attempts, and your childhood is John Connor."
2015/01/17 15:42:32
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
weeble1000 wrote: So saying that we don't have data on 40K is false.
We have data on 40k... not data that answers the question in question, which was written by Talys "how much has 40k really declined -- comparing 40k numbers from now, to pre-LoTR". A single data point saying 40k is half of total revenue in 2013 and another single data point saying the 5th ed 40k rulebook brought in roughly 2.7 times the revenue of the 7th ed WHFB rulebook is not enough to answer the question of whether 40k has really declined.
Secondarily, it is a non-issue. Who cares what GW's 40K related revenue is if the company's total revenue and profit are declining?
It is relevant in so much as it is interesting to talk about and hypothesise things... which is mostly what we do here because as far as I know none of us actually have a voice in GW's ear.
Also you will note it is not a question I personally asked, I simply stated we have no data to answer it.
And as for who is playing the game, anecdotal data is more valuable in that respect
The problem with anecdotal data is wargaming varies WILDLY from one location to another. Games which are supposedly popular in one area are unheard of in another. My FLGS has several games which I believe (from forums and whatnot) seem to be popular and I ask the owner and he says "oh I don't know anyone who plays it, no one buys it, I just decided to stock it on the off chance a group starts up but it's been sitting there for years gathering dust". The few different locations I've lived in across Australia and the USA had massively different wargaming communities.
The other thing about anecdotal data even within a given area it shifts among different gaming circles. If a game becomes less popular in competition maybe it becomes more popular among casuals. Conventions may feel huge but they represent a tiny subset of the overall community. I'd say internet forums are very much the enthusiast subset of wargamers, so noting a drop in popularity on forums does not necessarily indicate a global decline (as much as forum dwellers would like to believe they are the be all and end all of customers we so often see it's not true, look at how popular the COD video games are despite being hounded on gaming enthusiast forums)..
If you had a LOT of anecdotal data and actually tracked it's locations, demographic and frequency MAYBE you could construct a reasonable argument.
The only people with the means to realistically answer a lot of the questions we ask are GW themselves.
Now, I don't disagree the argument would be on the side of "yes, 40k is probably declining". But revenue hasn't really varied as much as would be required to definitively say that. Maybe it's just WHFB has died, maybe it's just the remnants of the LOTR/Hobbit dying out, I haven't checked but I also think royalties have dropped over the period overall revenue has dropped.
But when you ask the question "how much has 40k really declined?" The answer is "somewhere between not at all, 20% down or slightly up" which is not really a useful answer.
Maybe it's just because I do research for a living but I see too many giant gaping holes between equating GW's overall revenue and/or limited anecdotal data to any useful answer to the question of "how much has 40k really declined?".
This message was edited 2 times. Last update was at 2015/01/17 15:46:05
2015/01/17 18:58:30
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
AllSeeingSkink wrote: Yeah we know it's their strongest product and probably has been for many years... still no way to extract it's specific performance from GW as a whole. We know that the 7th ed WHFB rulebook pulled in roughly 37% of what the 5th ed 40k book did over the first 3 years of sale of each one. Given the swings in revenue are more of the order of less than 10%, it's hard to say anything much about 40k specifically in the grand scheme of things.
We do know GW is falling in spite if releasing a lot of 40k stuff over the past couple of years, but even then it's a stretch to specifically say 40k is failing. It says GW's strategy is failing.
Right. I forget who it was, but they made a valid point that GW had a large uptick because of LoTR and it's popularity (during the original movies). Since then, this has declined. So, in 2 years, when there are essentially very little LoTR sales if GW performance (as a company) is roughly the same as what it was before LoTR, then one may conclude safely that the company's performance is flat. If it's lower, then we can infer that level of decline, and if it's higher, we can safely say that non-LoTR sales have increased to that degree.
Right now, the numbers are still skewed, because there *are* Hobbit sales, though I'd argue that this is the last half-year where they are really significant. The point is, the comparison should be GW pre LoTR versus GW Post LoTR, because, LoTR was just some short-term, easy money, and post-LoTR boom one would expect the numbers to fade.
Also, it is possible that as someone else put it succinctly, that GW is actually correct, and that this is the best profit maximization scenario for GW. It is not beyond the realm of credulity to think that barring some other game, 40k fatigue and other factors like a desire for smaller games have made it such that what GW is doing is actually the best thing that could be done for GW's shareholders and coffers. In other words, even if rules were airtight, and even if everyone felt that GW loved them, there would still be a chunk of people that would still spend less money on wargames and a chunk of people who simply want to play low model-count games (which isn't GW's thing -- since they define themselves as a miniature company).
It is conceivable that the best way to maximize revenue was to charge the people who really want large model count wargames more money, to make up for the shift.
I would argue that GW should try to have the best of both worlds, and win the low model count market as well as the high model count scifi/fantasy market. I personally don't believe that having a low model count game would steal customers from their high model count and collectible player base. But, what do I know.
Automatically Appended Next Post:
AllSeeingSkink wrote: Now, I don't disagree the argument would be on the side of "yes, 40k is probably declining". But revenue hasn't really varied as much as would be required to definitively say that. Maybe it's just WHFB has died, maybe it's just the remnants of the LOTR/Hobbit dying out, I haven't checked but I also think royalties have dropped over the period overall revenue has dropped.
But when you ask the question "how much has 40k really declined?" The answer is "somewhere between not at all, 20% down or slightly up" which is not really a useful answer.
Maybe it's just because I do research for a living but I see too many giant gaping holes between equating GW's overall revenue and/or limited anecdotal data to any useful answer to the question of "how much has 40k really declined?".
This is the most insighgtful conclusion of this thread
My personal opinion is that 40k has declined a little bit in volume in the last decade. One way to poll this would be to ask many local independents how their 40k sales are (not GW sales), compared to 5, 10, and 15 years past. As AllSeeingSkink put it, checking how many people show up for competitions is not a good measure of the sales success of a product.
As for the indie retailers GW has gone after, it's been pretty limited to online retailers only to protect brick and mortar indies who can't compete with stores that are selling world wide at such a deep discount. It was hurting the indies and thus hurt GW hence why they did what they did.
If you go and ignore all the evidence that they do try and undermine the independents (including the brick and mortar onlys) sure. Like turning half their range direct only.
I won't disagree that GW doesn't support its independent, local stores well. However, it just isn't true that "half their range is direct only".
The only models that are direct-only are the ones that aren't in production, and made of materials that GW doesn't want to sell anymore (finecast and metal). Once they sell out of the web store, they are out of stock, and GW doesn't replenish them (or it doesn't seem like it). How long have Dark Eldar grotesques been sold out? This is actually a useful unit (but finecast).
Please find a currently produced plastic kit that's direct-only.
Also, independent stores CAN buy direct-only items; it's just, they get only a small discount (I read, 10-15%, but I don't know the percentage for a fact). On regular items, they receive a 45% discount from MSRP (this, I can say for sure, at least in US/Canada)..
This message was edited 2 times. Last update was at 2015/01/17 19:11:49
2015/01/17 19:51:00
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
Talys wrote: I won't disagree that GW doesn't support its independent, local stores well. However, it just isn't true that "half their range is direct only".
The only models that are direct-only are the ones that aren't in production, and made of materials that GW doesn't want to sell anymore (finecast and metal). Once they sell out of the web store, they are out of stock, and GW doesn't replenish them (or it doesn't seem like it). How long have Dark Eldar grotesques been sold out? This is actually a useful unit (but finecast).
Please find a currently produced plastic kit that's direct-only.
Well, some people over at the Warseer forums keep special thread dedicated to the direct-only items. Not being a retailer I can't verify that information, but the list is quite long. Out of it I'd consider minotaurs and boar boys a rather recent pair of kits, and most likely still in production.
Painting progress tracker:
2017: 50 of 50 planned; 2018: 80 of 60 planned; 2019: 75 of 75 planned
Pledge 2020:
6 to sculpt, 75 to paint (2/57 done)
2015/01/17 19:57:32
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
Every last one of those kits - all plastic, all still in production - are direct-only. That's on top of the fact that all metal and finecast are also direct-only. And that's only Fantasy, it's barely any better for 40K - ffs, the basic box of Chaos Space Marines, as well as the new plastic Raptors box and the Bikers are direct-only.
"Your society's broken, so who should we blame? Should we blame the rich, powerful people who caused it? No, lets blame the people with no power and no money and those immigrants who don't even have the vote. Yea, it must be their fething fault." - Iain M Banks
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"The language of modern British politics is meant to sound benign. But words do not mean what they seem to mean. 'Reform' actually means 'cut' or 'end'. 'Flexibility' really means 'exploit'. 'Prudence' really means 'don't invest'. And 'efficient'? That means whatever you want it to mean, usually 'cut'. All really mean 'keep wages low for the masses, taxes low for the rich, profits high for the corporations, and accept the decline in public services and amenities this will cause'." - Robin McAlpine from Common Weal
2015/01/17 21:02:20
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
AllSeeingSkink wrote: Yeah we know it's their strongest product and probably has been for many years... still no way to extract it's specific performance from GW as a whole. We know that the 7th ed WHFB rulebook pulled in roughly 37% of what the 5th ed 40k book did over the first 3 years of sale of each one. Given the swings in revenue are more of the order of less than 10%, it's hard to say anything much about 40k specifically in the grand scheme of things.
We do know GW is falling in spite if releasing a lot of 40k stuff over the past couple of years, but even then it's a stretch to specifically say 40k is failing. It says GW's strategy is failing.
Right. I forget who it was, but they made a valid point that GW had a large uptick because of LoTR and it's popularity (during the original movies). Since then, this has declined. So, in 2 years, when there are essentially very little LoTR sales if GW performance (as a company) is roughly the same as what it was before LoTR, then one may conclude safely that the company's performance is flat. If it's lower, then we can infer that level of decline, and if it's higher, we can safely say that non-LoTR sales have increased to that degree.
Right now, the numbers are still skewed, because there *are* Hobbit sales, though I'd argue that this is the last half-year where they are really significant. The point is, the comparison should be GW pre LoTR versus GW Post LoTR, because, LoTR was just some short-term, easy money, and post-LoTR boom one would expect the numbers to fade.
Also, it is possible that as someone else put it succinctly, that GW is actually correct, and that this is the best profit maximization scenario for GW. It is not beyond the realm of credulity to think that barring some other game, 40k fatigue and other factors like a desire for smaller games have made it such that what GW is doing is actually the best thing that could be done for GW's shareholders and coffers. In other words, even if rules were airtight, and even if everyone felt that GW loved them, there would still be a chunk of people that would still spend less money on wargames and a chunk of people who simply want to play low model-count games (which isn't GW's thing -- since they define themselves as a miniature company).
It is conceivable that the best way to maximize revenue was to charge the people who really want large model count wargames more money, to make up for the shift.
I would argue that GW should try to have the best of both worlds, and win the low model count market as well as the high model count scifi/fantasy market. I personally don't believe that having a low model count game would steal customers from their high model count and collectible player base. But, what do I know.
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AllSeeingSkink wrote: Now, I don't disagree the argument would be on the side of "yes, 40k is probably declining". But revenue hasn't really varied as much as would be required to definitively say that. Maybe it's just WHFB has died, maybe it's just the remnants of the LOTR/Hobbit dying out, I haven't checked but I also think royalties have dropped over the period overall revenue has dropped.
But when you ask the question "how much has 40k really declined?" The answer is "somewhere between not at all, 20% down or slightly up" which is not really a useful answer.
Maybe it's just because I do research for a living but I see too many giant gaping holes between equating GW's overall revenue and/or limited anecdotal data to any useful answer to the question of "how much has 40k really declined?".
This is the most insighgtful conclusion of this thread
My personal opinion is that 40k has declined a little bit in volume in the last decade. One way to poll this would be to ask many local independents how their 40k sales are (not GW sales), compared to 5, 10, and 15 years past. As AllSeeingSkink put it, checking how many people show up for competitions is not a good measure of the sales success of a product.
As for the indie retailers GW has gone after, it's been pretty limited to online retailers only to protect brick and mortar indies who can't compete with stores that are selling world wide at such a deep discount. It was hurting the indies and thus hurt GW hence why they did what they did.
If you go and ignore all the evidence that they do try and undermine the independents (including the brick and mortar onlys) sure. Like turning half their range direct only.
I won't disagree that GW doesn't support its independent, local stores well. However, it just isn't true that "half their range is direct only".
The only models that are direct-only are the ones that aren't in production, and made of materials that GW doesn't want to sell anymore (finecast and metal). Once they sell out of the web store, they are out of stock, and GW doesn't replenish them (or it doesn't seem like it). How long have Dark Eldar grotesques been sold out? This is actually a useful unit (but finecast).
Please find a currently produced plastic kit that's direct-only.
Also, independent stores CAN buy direct-only items; it's just, they get only a small discount (I read, 10-15%, but I don't know the percentage for a fact). On regular items, they receive a 45% discount from MSRP (this, I can say for sure, at least in US/Canada)..
The Minotaurs and Chimera are plastic and direct only and thats without looking as I went to my local gw last week to buy them only to be told nope cannot direct only.
Your last point is especially laughable and comical, because not only the 7th ed Valkyrie shown dumber things (like being able to throw the troopers without parachutes out of its hatches, no harm done) - Irbis
2015/01/17 21:15:26
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
Every last one of those kits - all plastic, all still in production - are direct-only. That's on top of the fact that all metal and finecast are also direct-only. And that's only Fantasy, it's barely any better for 40K - ffs, the basic box of Chaos Space Marines, as well as the new plastic Raptors box and the Bikers are direct-only.
You're totally off base on this one.
Ok, fair enough. I don't play and only loosely collect Fantasy. I just can't think of any 40k models that I've ever wanted in plastic that my store didn't have or couldn't get.
By the way, my store has tons of Bretonia. Perhaps it's old stock as FB doesn't sell well.
Re: Chaos -- I certain won't argue that with you, but I'm sure I've seen basic Chaos SM on the shelf.
Edit - you are definitely wrong about basic CSM. I happen to be at a MtG tournament, and the store has a new box basic CSM, ordered after boxing day.
This message was edited 3 times. Last update was at 2015/01/17 21:47:58
2015/01/17 22:59:44
Subject: GW Shares Drop As Operating Profit Falls Vs LY - NEW report for 1/2015 page 21
They're similar in that both are cheap to get into, and *ridiculously expensive* to collect if you love them. There's nothing wrong with playing with a starter box.
They can both be rediculously expensive, no question about it. But like i said, 2x starters for magic (which each came with 2 boosters) cost me $50. Dark vengeance costs $165 and needs assembly. The buy-in difference is staggering.
Talys wrote: Sengir vampire is not a great example of a great card though. Try Mox stones, black lotus, diamond valley, dual land, time walk.... Yeah, the cards that allowed you to win the game without your opponent ever getting to even play In every release, there are a few jewels. If you must keep up with the collection, be prepared to pay a *lot* of money.
Yeah i know it's not one of the big cards, but i have a sengir/vampire deck and it was the first example that popped into my head regarding an 'old' version card vs it's 'new' version.
Talys wrote: There are tons of differences between MtG and 40k, and I think MtG is a better business, and a better managed business. Still, their similarities are basically that they encourage their customers to keep spending money. The whole framework is "buy in, buy more". Board games basically are, "Buy in, Play, Buy Next". I think the board game strategy is a losing one, long term (just my opinion) -- because eventually people become less interested in picking up something new, and disenfranchised with or can't find play partners for the old. It also isn't possible to have a high purchase velocity with board games, because they are by nature not really collectible.
I agree, the thing is magic is priced at a level where a continual spend is possible. You can buy a cheap booster every week without breaking the bank, and have a chance to get one of the ultra-rare cards. A low chance for sure, but still a chance. I can't open a pot of khorne red paint from gw and find a stormraven inside.
Talys wrote: WMH is definitely in the buy in/buy more camp, but their escalation to date has been somewhat gentler, and the model count is lower. Make no mistake though, their business model relies on customers to upgrade their armies and buy the new, bigger stuff. From the Borka's to Mountain Kings to Collossals, there are larger and more expensive units than the original game envisioned. At some point, perhaps WMH too will decide that to make more money, they wlll decide to further escalate the units in the game (either bigger models, more models, or both).
It's still early days, but yeah i get that feeling too sometimes. The thing is, i think they're more likely to do it 'right'. I doubt that they'll start increasing model count & increasing prices & reboot the core rulebooks cyclically with random changes instead of improvement.
Ironically, the original buyer simply photocopied it hahaha.
