"Sales woe for Games Workshop" Topic

Hot off the business press…

Further sales woe at Games Workshop

Fantasy war games retailer Games Workshop has warned its full year profits would fall short of market expectations after interest in Lord of the Rings – one of its mainstay lines – continued to wane.

The Nottingham-based group, which makes model versions of the trilogy, said revenues for the six months to November 27 had fallen from £71.00 GBP million to £57.10 GBP million and profits before tax tumbled from £7.60 GBP million to £119,000 as the "bubble" created by the Lord of the Rings films continued to deflate.

It released interim figures earlier than scheduled because the group said sales for the five weeks to January 1 indicated a further decline of 17% year-on-year.

Games Workshop warned in July that a "bubble-effect" surrounded the trilogy as fans rushed out to buy associated goods soon after the movies' releases but in 2005, with no new films out, interest in the products declined.

The company said sales in the second half of 2005 were 20% down on the first half, which was "slightly more severe" than expected.

Sales to independent toy and hobby retailers also reduced, notably in the US, it said, where smaller operators were closing and its turnover fell from 27.1 million US dollars (£15.4m) to 21.6 million million US dollars (£12.3m).

To combat the slump Games Workshop said it was developing its Hobby stores, where staff offer instore model painting and gaming lessons.

It is also investing in recruitment and training, improving operational efficiency and sourcing products "cost effectively" from Europe and Asia.

Despite the profits slide, the group intends to "re-establish" sales growth by opening more new stores in 2006 although the locations have not been revealed.

The Games Workshop was established more than 30 years ago by three gaming enthusiasts from London. It now operates through more than 300 Hobby centres and 4,000 independent toy shops internationally, including in the UK, US, Canada, France and Germany and the majority of its models and games are made at plants in Nottingham and Memphis, Tennessee.

Copyright (c) Press Association Ltd 2006, All Rights Reserved.

what we all knew but GW wouldn't admit.

I may have calculated this wrong (and with my maths skills that very possible!) but I make that a drop in pre-tax profits of 98%.

I like the Workshop stuff so I hope they survive, but this is rough!

Iain
The Hobbybox

I wonder how the sales of core products have fared (apart from LotR). If they are fairly stable then LotR alone accounts for that slump which spells disaster for ongoing support and releases.

Interesting to see what the "sourcing products cost effectively" from Asia entails.

Please, if the over-paid stuffed shirts at GW did not see this coming before they bought the rights to "The Lord of the Rings" figure line, they 'should' go out of business.

GG

Scary. I wonder what this announcment did to their stock price.

"I make that a drop in pre-tax profits of 98%."

Yup, give or take. The scarier spin is to say that if the trend continues and their profits drop another 7 million pounds, it's not a profit anymore but a dramatic loss.

The fact that closing independent retail outlets in the US is mentioned is interesting. Do you suppose GW cited that themselves, or is it the AP connecting (some of) the dots?

JJW-T.C.H.

To combat the slump they should knock 25% off their prices for the month of January, I'd be happy with that : )

The GW share price is currently down 13.5% on yesterday

Not a bad idea Spacelord.
Now would be the ideal time to cease production on LOTR, even if that involved 'taking a bullet' from external supplies/manufacturing and then just clear the remaining LOTR stuff from the shops and mail order.

I'll be interested to see if this has any mention in next months White Dwarf. Considering the mag is written approx 3 months before publishing date, I'd still be surprised if there wasn't some sort of amendment to the mag to cover this in either Feb issue or March.

Iain.

GW shares have fallen from 880.44 pence per share on 24 Jan 2005 to a current 324.37 pps today. Ouch!

From the article: "Sales to independent toy and hobby retailers also reduced, notably in the US, it said, where smaller operators were closing …"

Not mentioned is GW's previous policy of No Soup For You for any independent retailer selling at discount, and their policy of using independent retailer sales to determine where to open up their own shops. A GW shop siphons off the sales going to the local IR/FLGS, who then closes. Now I suspect many of the GW shops will close.

Now, in a perfect world, this would mean that there would be a new group of IRs to fill the FLGS niche, but I find this highly unlikely in an age of Internet vendors (many of whom are excellent) and fast shipping.

Absolutely correct. New independent retailers will not open up to fill in any gaps left by closing GW stores.

That's okay. Who needs a FLGS, anyway?

I'm not familiar with English business law. Here in the States, all publicly traded companies have to release quarterly statements and and a yearly document with income statement. Do English companies have to do this and if so, does anyone have a copy of the documents for GW? It would go along way in explaining the drop in profits….

Did you notice the remark about finding cheaper product sources in Europe and Asia? Sounds like GW might be ready to start having its products manufactured in cheap labor markets.

That they manufactured in plants where the employees actually were paid a decent wage was one of the things I always respected about GW. I hope they stay in Western Europe and America.

I think they would see a real surge in sales if they would just back off their prices a bit. $10-$15 for single 28mm character figures is just too much. GW's problem is blotted infrastructure, terrible vendor support (take a lesson from WIZKids here) and multi-million dollar CEO payouts.

I think they flushed about £3.00 GBP million GBP down to the toilet from warhammer online when they pulled the plug- that didn't help things. They'll bounce back like always. GW is always a great oppurtunity to make money on shares with their constant boom and bust share prices.

I actually really like the GW LoTR stuff – I hope they can keep producing the line.

Here's hoping that Hollywood can actually churn out a decent "Hobbit" movie.

-Alex

I believe the Warhammer Online write-off was taken in the previous quarter, althought he resports haven't been perfectly clear about it. Certainly the story doesn't mention it, as would be expected of a charge that size.

JJW-T.C.H.

A small drop in product prices, keeping/re-introducing models/games people loved and trying to build better relations with people could easily turn it all around for them. They do have a good product overall, but I think since they became more and more the big company rather than enthuisiasts running a company some bad choices were mad – they may have made sense business wise on paper, but the wargaming market are a fickle lot.

Hmmm, I wonder how their practices of not letting people sell their product online effected the bottom line. IMO they made a really big mistake there.

Also you got to think games like Warmachine probably put a hurting on them last year. In my area there were droves of GW players converting to Warmachine, FOW and SST.

Maybe they should be getting a license for Narnia.

I don't think that they should drop Lord of the Rings. There will be an upturn in about four years time when the Hobbit gets released but they have to recognise that it will be a wargamers product and not a general consumer item for the next three years.

For wargamers, the GW prices are simply to0 far above the normal levels – cavalry £5.00 GBP in comparison with everyone else at £2.50, infantry £2.00 GBP in comparison with every one else at £1.00 GBP or less.

I would still buy more LOTR but the prices make me choke.
For example, I want to buy 30 Haldirs elves but I think I would have to be stupid to pay £60.00.

Like many others, I am currently spending my money with Mirliton, Perry and Zvezda and soon Front Rank.

Holy carp batman! Revenues have *fallen* to over £100Million a year. I must remember to quote this the next time the "Is the hobby dying" question arises.

They lost me as a customer this year, because as a 36 year old with a wife and two kids, I just can't afford their prices anymore.

Plus I have noticed a certain decline in the standards of their articles and quality of their supplements etc over the last two-years!

Not only that a third of White Dwarf devoted to a system I am not interested in has stopped me buying even that.

GW has done for me, and for quite a few over people as well.

Stormwolf

They'll chop and change and reorganise the company and probably survive, but I agree, they have what seem to be good moves on paper that just haven't bought in the customers.

Oh, and even though I din't really buy anything from them anymore, it was GW back in the eighties that got me into painting miniatures, so I hope they do pull through.

Even I like the LOTR stuff from GW (and I hate most of their stuff). That said, I still say finally, bad news for a nasty company.

They lost me as a customer 10 years ago.

Just goes to show, you can't keep milking the same two product lines forever and expect to keep increasing your sales. WFB and 40K are both old, old, old, despite the constant rerelease of new editions. LotR put some money in their pockets briefly, but what have they got coming out next except more of the same old thing? There's just no diversity to their releases anymore, and their (mis)treatment of the Specialist Games range hasn't helped the problem one bit.

Put simply, stop raising prices to stupid levels and sales will improve. I haven't bought a metal GW figure in several years, even the plastics are reaching stupid price levels. Some of the mininatures are great but i'm just not willing to spend that much on one figure. Oh and as soon as I buy a codex its out of date and i'm supposed to buy another one.

Frankly, I don't think their prices are too far out of line with other FANTASY and SCI-FI lines, especially with rank'n'file. Comparing with historicals is just pointless.

Though the above is largely affected by most of the others in the field wanting to copy their "exclusive models at exclusive prices" business model.

Another thing GW has done over the years is gone with plastic and charged crazy prices for them.

SST is coming out with a box of 20 metal figures for $24. USD If this was GW you would probably see the box selling for $50. USD

SST is coming out with a box of 20 metal figures for $24. USD USD If this was GW you would probably see the box selling for $50. USD USD

Those miniatures were originally supposed to be plastic but there was a problem with the molds. Mongoose has decided to release them as metals for the time being, but has stated that they are taking a hit on them.

IMHO, GW should reverse their decision to stop the specialist games and then call it quits on the LotR lines. Keep the SGs (Necromunda has always been a favorite of mine) and develop them further, like developing a more generic rules set that can be placed in any genre or on any planet. Include the Gorkamorka vehicle rules, the gang construction rules from Necromunda, and the development rules from Mordheim.

Cut prices by 15-20%, that will boost sales. Maybe start making some figs that are not so game-specific (like the old space adventurers line) and can be put into place in any game system they have. Revise the Inquisitor rules for 28mm scale and then they could open up more individual figures sales.

A takeover of GW by Hasbro seems not entirely out of the realm of possibility. Would complement the WOTC franchise nicely.

Also, GW is not going to cut prices. They'll stabilize a bit, but they won't go down.

What goes around…comes around….

GW has had it's 'way' with customers, distributors and retailers for some time now…and we've all heard the horror stories…MANY times…and now the 'chickens have come home to roost'…

It's still 'sad'…

Lt DWW

GW didn't put out very much new stuff for LotR last year, which might account for some of the further reductions in sales of that line.

The new rulebook, the new Mines of Moria box, and some really cool new armies have just come out or will be coming out in the next year. I wouldn't count the game out just yet.

One other factor might be MMORPGs. The MMOs target the same market that GW does, pretty much, and have had their biggest years ever recently.

Praetor wrote:

"Put simply, stop raising prices to stupid levels and sales will improve."

Yup…
and, well…yup

I bailed 3 years ago when 12 plastic figs went to 30 dollars.
Raising prices (on a luxury item) to maintain a profit margin in the face of slunping revenues is the first step on the road to oblivion.
What they fail to realize is that they would increase revenue 300% by dropping their price by 50% AND double their profit dollars.
Ah, well…c'est le monde

Rob

It seems very odd that a roughly 20% fall in revenue leads to an almost total wipeout of profit. If GW's operating costs are £57,000,000 as these figures imply they should think about trimming the fat.

I don't play GW games but I'm glad they make (or should that be made)tons of cash. I like to see companies be successful and I hate hearing people winge about it as if the company in question owes them something personally.

I'd hate to see them fold, but my sense of schedenfreude loves to see Tom Kirby taking it on the chin.

I honestly believe that GW had the chance to avert this crisis two years ago, when the LOTR money was coming in hand over fist. They could have plugged that money into R&D and newer lines, even a revival of the one-off games that still go for top dollar on eBay, and had this time to build up those lines to sustain when the LOTR bubble inevitably popped. But instead, they opted to become even less diversified — witness the treatment of Fanatic/Specialist — and divert critical funds into bonuses for the top execs (Mr. Kirby took home $3 USD million in pay and bonuses in 2004).

Here's the Investor Relations page:

link

And executive compensation:

link

GW's solution to the problem!
Raise the prices even more!!!!

Oh, and they could do a lot worse than re-integrate themselves with the non-wargaming market by bringing back stuff like Talisman and Space Hulk. The second-hand market for those games shows that there is a lot of interest and lets face it wargamers are a tiny minority of the purchasing public. Less specialised games which are cool and sell to "regular" folk would help their profits a lot.

(Says a man who's never run a business in his life and who currently has some trouble balancing his own books!)

If you dont sell any boxes, there is no profit. In the case of the plastics the number of figures per box have dropped, the metal parts (in some boxes) have gone, the price has steadly climbed, due to the wordwide plastic shortage (joking). When the plastic regiment sets started they were a cheap way to build up a army, they aren't anymore.

If its costing you £6.00 GBP to produce 16 plastic figures and sell them in your own stores, your company is in trouble. The cheaper these boxes are the more they will sell and what genius made the descision that the LOTR range should be in a different scale to warhammer.

@praetor – I read an interview with the Perrys once where they said the LOTR license said the scale had to be different. To stop people just using their WHB minis one presumes.

They should put Sally in charge.

Justin
I fully share your logic.

Good business is to sell one of something at a high profit rather than three of the same thing at a lower price with lower profits which then combine to produce the one-item figure.

Not that we are anything like in the same league as GW, but from August our sales took a dip. I think that the UK is probably a long way from recession but that people are now being more careful with their spend and hobby spending is amongst the first of the casualties.

Mike B

The license thing is probably true, it just irrated me at the time as I was going to use some of the LOTR in an army I was building.

Thats what GW gets for not focusing on their really good games… Mmmmm… Warmaster…

I bought the rulebook, but just couldn't be bothered with price for 10mm figures. I get around to using somebody else figures with these rules sometime.

Sales tip, if the price is lower i am much more likely to buy several boxes in one go and come back for more. If the price is high i'll look at the figures, and think "good figures" and look for another range producing something similar.