"Games Workshop profit warning" Topic

LONDON (AFX) – It was a tough start to the day's session for Games Workshop, plunging 43-3/4 pence to 363-1/4, after the fantasy figurines group issued a profits and sales warning, which prompted Bridgewell Securites to slash its
earnings estimates, dealers said.

Earlier this morning, while announcing its interim results, the release of which was brought forward, Games Workshop said its year to end-May 2007 sales and profits are likely to fall short of current market expectations.

For the six months to Nov 26 2006 pretax profit was 0.1 mln stg, the same as the previous corresponding period, on revenue of 54.8 mln stg, down from 57.1 mln stg last time.

In response, Bridgewell Securites said the interim results came sooner than expected and made for mixed reading.

The broker pointed out that the group's performance in the first half has followed a similar course to the second half of the prior year, while headline revenues continue to decline, although at a sharply reduced rate both year on
year and sequentially.

Source: AFX new 5 Jan 2007

For all the GW bashing that goes on, consider that, with turnover of GBP54.8 million it makes only GBP127,000 profit in six months. There must be lawyers who earn more than that.

they have it all hid under the Golden Throne.

Must be? at least half of my colleagues earn more than that.

Pat

Too bad they haven't figured out that alienating your customers with codex escalation, planned onsolescence and contant price increases has cost them a lot of players that used to be buying their products.

Oh well, looks like they need another price increase!

I haven't bought anything from GW for a year, I guess it must be all my fault !!

Mwaaahahahah

There must be lawyers who earn more than that.

Not even a lawyer would charge me ten dollars for a can of spray paint.

link

Article about this in the Telegraph. It was also promenent enough to make the BBC breakfast news.

Correct Guy, they would not. They would take you out for a client meeting, bill you lunch and send you the spray paint as a freebie.

Pat

"Not even a lawyer would charge me ten dollars for a can of spray paint."

No he wouldn't, he'd charge you $5 USD and then a fee of $25 USD for advising you which one to buy. He'd then try to sell you insurance so that you were protected against the effects of bad advice.

He'd probably also write you a letter confirming the sale, for which he'd charge a further $25. USD

Aren't we glad we're protected so well by these guardians of justice !!!

The BBC Radio 4 breakfast news slant was along the lines of "children's imagination looses out to computer games, again"

Lawyers wouldn't sell you insurance against their bad advice. That's covered by their own professional negligence insurance.

For Pete's sake, they need to LOWER prices. They have great figures, and I've bought a fair bit lately-- OFF EBAY.

I think what most people are missing is that Workshop have had a couple of years of and are on the way out of the hole, not deeper into it.
As reported on the BBC website:
"The detail is encouraging," said Iain Daly, an analyst at Bridgewell. "But the pace of recovery is slower than we had been looking for."

Most companies who have been through problems like this (For GW, the LOTR problems, their online game problems, etc) experience a year or two of profit warnings, etc before things get back to an even keel.

The share price may have dropped on the back of this, but GW will still be healthy if people hold onto their shares.

The same thing happened to my place a few years ago (I work at a major insurance company in the UK)

Cheers,
Iain.

I'm sick and tired of them blaming LOTR for all of their woes!!! They got a couple of years of big bang from LOTR that they would not have had without it!!! They just did a very poor job of calculating the way it would level off, and their pricing has pushed many people away from LOTR.

I haven't bought a GW fig in over a year because of the price. When they were going at $6.00- $7.00 USD for a pack of 3 or 4 metal figs, I was buying a lot of them, but at $10.00 USD a pack, I am not buying any even though I think a lot of their figs are great! I will look to other manufacturers for what I want.

I don't think their slide has nearly as much to do with anything they've done as much as all the competition for the same target market's dollar.

So many things a 12-18 year-old can be spending their money (and maybe more importantly their time ) on these days.

I don't think GW's struggles has all that much to do with their retail prices. I think it's more likely the hobby is passing them by. The only really new product they have had in a long time was the LOTR line, and that was fueled by the movies for the most part.

Rather than simply expanding on their current products, aimed at getting more money out of their existing customers, they need to expand their productline and take it in new directions that attracts new customers.

I haven't stopped buying GW stuff because it's expensive. I've stopped buying it because I already have everything of their's that I want.

I have to think that the clix have hurt them as well. I mean if I were a kid and it were a choice between painting my own fantasy figs and prepainted D&D figs (which is what I originally bought all of my GW stuff for when I was 8) I would probably go with the pre-painted stuff.

Buying that stuff and being forced to paint it got me into the hobby, GW and then everything else after that.

I wonder if the retail stores are causing a big drag on the bottom line, especially in the US. I dropped by two GW stores near Atlanta, and there wasn't a lot of traffic in either store. The malls were packed, however.

Yep, that's me. Haven't bought anything from them in a couple of years. Traded heavily, buy some from eBay, but that's it. It is a shame: I'd like to keep buying from them, and it looks like they can use the money, but i cannot afford their prices.

I'm with mandt2 on this one. I've got all the 28mm sci fi I will ever need, why buy more. The only things I might order are a couple of Warmaster packs to round out my elf & dwarf armies. I can't even say I dislike the current games, I'm just not interested in them anymore.

Most of GWs woes are related more to increased costs in materials, energy, wages, shipping/transportation, overhead, medical benefits (in the US), increased competion/saturation of the market, alternative sources of entertainment, and a continually weak dollar – not just "customer alienation."
When you're a privately owned company, you can ride out trends like this with the attitude of "oh well, we'll do better next year." Unfortunately, like all Public Companies, GW has shareholders to answer to, and those who are the majority shareholders, want to see their investments returned right away.
Lowering prices won't help. It will actually worsen the situation. GW is showing some turn around, as Iain stated, but some hard decisions probably still have to be made – like the closing of GW stores, reduction (or further reduction) of workforce, scaling back and elimination of product lines, harder stance with retailers – mainly those who don't pay on time, and that's most of them – to even possibly relocating manufacturing to China, India, etc.
but that's just my $.02 USD

Kevin,
Agree with you fully.
I have said for a long time that GW needs to get a serious handle on it store/trade situation.

As an independent trader I can buy stuff from them (in the UK) and sell it out at 15% off retail. I don't make much money on it, but money is money!

The stores are facing competition from hundreds of traders like me. The Swindon store frequently looks bare of customers, and those that are there are frequently painting/gaming, and not buying.

I know many of the guys in there, to speak to, and they are nice guys so I'm torn on the issue, but GW need to revise their business model based on the upsurge of internet trade, that or start reducing the number of independent traders they stock to, to force more punters into the shops.

When GW's prices are going up well above the annual rate of inflation, and their revenues are still dropping, that means they're losing quite a few customers.

Sadly, 2006 was the year where I had to stop buying GW blisters. I had been spending a few hundred dollars a year on the LotR and BFG lines, but I could no longer justify it after the metal models went to $12 USD for 3 standard troops, or $20 USD for a command, cavalry or character figure. Those prices are 50% higher than when the LotR game first came out, five years ago or so. My hobby budget simply can't keep up, and I'm sad about that.

Interestingly, since I like to collect and build complete armies, cutting myself off from the metal blisters also meant I stopped buying the more reasonably priced plastic boxes.

I don't think GW's struggles has all that much to do with their retail prices. I think it's more likely the hobby is passing them by. The only really new product they have had in a long time was the LOTR line, and that was fueled by the movies for the most part.

Rather than simply expanding on their current products, aimed at getting more money out of their existing customers, they need to expand their productline and take it in new directions that attracts new customers.

I haven't stopped buying GW stuff because it's expensive. I've stopped buying it because I already have everything of their's that I want.

That's so exactly correct, it ought to be tattooed on Tom Kirby's forehead. They want to just keep selling us the same game over and over, and they just cannot seem to accept that it just won't work forever…

"I have to think that the clix have hurt them as well."

Topps just put out there report. Topps made money but the Wizkids unit lost again: "WizKids, on the other hand, was down substantially vs. the year ago period, and those declines are expected to continue in fiscal Q4. The WizKids declines were related to both reductions in sales of Pirates vs. the year ago period, and "softness" in its core gaming products.

There are apparently some improvements expected, however. In the conference call, management said it believed that the restructuring it had put into place combined with some things that are "too early to announce" will begin to turn the WizKids business around."

I don't know how Hasbro is faring.

I'll be willing to bet the Warhammer Online project pulls them out of this slump. It should draw people both into their miniature lines as well as from.

Rabbit

Im not so sure about that Psycho. Dawn of War (an excellent RTS IMHO) hasnt really drawn in the new blood I thought it would.

On the other hand, word of mouth still works! I got my nephew (9 years old) interested in the minis and the game. Granted, I am building and painting the minis, but at least he's playing….

Look out the sky is falling!

Again!

To give them some credit the stores do a good job on introducing young players with intro games, painting sessions etc.
This has got to be better than having a new player trot along to an indie store only to be told "Sod off kid, we're playing D&D today". Some indie stores are much better than GW, but like Burger King, GW offer consistency.

Mandt2 and Hundvig have it right.
When your business plan consists of re-writing Wrahammer and 40K, endlessly, what kind of a future is that?

For a company that is supposedly based on imagination, re-writing old rules is a singularly un-imaginative path to take.

I have no dog in this fight. But, how many editions of "Warhammer Fantasy Battles" do I have to buy?
I know people who live for the latest iteration of armor save, and argue over it, but none of them buy much.

I dont buy 'direct' anymore because of the prices.

What I want I get off ebay at 50-66% GW price. The fleeting interest of their 'target group' means that there is always a supply. If the price goes above my limit I wait for the next lot.

Also, if LotR was sooo good where are the follow-ups to Battle of 5 armies? It was touted as the first in a series but seems to have been abandoned. If they have the license why are they not using it? A big box, limited edition, LotR game every six months would seem a good way to help sales.

As a side note, the new Warmaster Araby army seems to me like an open invitation to an unofficial Haradrim army…

I know of several long standing clubs all across the U.S. that gave up playing Warhammer Fantasy and 40K because they simply got frustrated having to pay for new editions of the rule books every year and constant price hikes for figures.

Does anyone still believe good Tom's buying of more shares was out of confidence on his actions and how well the company was doing?

Still, they raised their prices and will raise them again.

Poor guys, they will never yield.

GW will be in business for a LONG time. They own the distribution…which at any point they could use to sell other products. They have tremendous cash flow and resources. They can come out with new products MUCH easier and in a bigger way than any other wargames company in existence.

Love them or hate them – they are a force to be reckoned with and will continue to be.

I hate the price hikes and the regurgitation of codexes and rules annually. It drove me away. I buy a few items here and there when their figs really appeal to me from a coolness factor, the new Giant for instance.

But as Fifty4 said they "will be in the business for a LONG time".

I feel as a hobby we have to hope they stay. We have to also hope they gain clarity and find a way back to the origional players whom were the ground work for their success.

Distribution is an absolute key and the commitment to influence. No other set of shops or gaming brand can attract the average joe on the street like GW does.

If you look at Battlefront with Flames of War they have totally copied this model. They release new products every two weeks, nicly packaged. Yes, at a premium price. However, they are also setting up tremendous after sales support with the web and tournaments. They actually have POP materiels in shops to attrack buyers. We might see them in a mainstream store like Barnes and Nobles at soem time. GW was there with the LoTR products.

We need more of this in order to keep the hobby viable. We sorely lack the participant numbers of many other top hobbies. Plastic models, trains, remote control, slot cars are all huge in comparison and filled with companies large and small. It's the big companies and players that fuel and maintain momentum for those hobby groups. Check the stats for hobbies like hunting, shooting and fishing. Those three rack up billions with a B.

I hope GW will eventually, truley partner up with the Historical portion of the hobby.

I wish they had the foresight to set it up so a kid could walk into a company driven shop and was able to pick up a book on Eldar, Space Marines, Napolenics, ACW or WW2. Then have the staff that could walk him through the complete purchase experience and support him during the initial build up. If they also supported additional products from mainline sources to defer needless costs, 10$ a can spray paint, and cross promote. The hobby would flourish.

I look at the Pulp games, Gangsters, Modern Skirmish and all are quite similar to the GW world, "Movie-like Fantsy". If GW would only listen to the pulse of the hobby long enough to breath; the company might find its way into these markets and find them as appealing and profitable as their current core market.

There have been awsome movies and TV programs that pull along the hobby without directed support and influence. If a Historical company got behind Braveheart or Kingdoms of Heaven with a product launch, premade armies online support it would keep the interest levels up for more than one or two cons.

The managment of GW needs to realize that if they tow the line "The Games Workshop Hobby" they alienate numbers of potential participants. I have White Dwarfs from the 1980's when they still reffered to it by it's proper name, miniature gaming.

GW does over 100 million USD, which makes them a solid company. I would be interested in finding out what the gross revenues were for the top 25 historical companies combined. I would bet it couldn't near the volume of GW. I would also love to get those same companies to give a synopsis of how they see growth across the sales horizon over the next year, 3 and 5 years.

I know this is a rant but I feel we need this type of discussion to help sway the manufacturers to promote, support and further our hobby.

T

jlmartin,

>Too bad they haven't figured out that alienating your customers with codex escalation, planned
>onsolescence and contant price increases has cost them a lot of players that used to be buying their
>products.

While this was upsetting some people it built their business. If they hadn't adopted this strategy they wouldn't have a business at all.

I don't play GW games now because I don't have time to keep up with revisions. Otherwise I find many of their games fun. I'm not part of their target demographic. I buy into 'open' games (without exclusive miniatures) precisely because I won't get stuffed buying some 'champion' figure for a relatively large amount of money. Games companies can't build a large scale business on people like me. Which is why they quite sensibly ignore moans from people like you (and me!).

As some of you have commented, there are now so many alternative entertainment products now that people who were previously 'shoe horned' into miniature gaming can now find alternatives that interested them more, such as gaming on consoles, CCGs or collectable miniatures games.

I don't think GW will survive as they aren't innovative enough to be a successful entertainment company. I think that what we will see in their place will be companies like WOTC, and others, selling 'booster packs' of pre-painted plastics for games based either on their intellectual property or that based upon books/films (buy the new Blade II minis booster!).

You folks have hit two of GW's biggest problems: their "churn and burn" business strategy and their limited product line. One other problem as I see it is that these two things have caused an "acolyte" mentality to arise among player and fans of their products in a similar way to Star Fleet Battles.

Let me explain. Right now much of Games Workshop's catalog comes from products that either use GW rules mechanics or are based in the GW universe. It wasn't always this way. There was a time way back when, where GW did supplements for other rules and systems. There was a time when they published and developed new and exciting games that attratced a following. Also the marketing model they have chosen, along with their pricing have done much to drive away casual or less interested gamers and has helped to create an "acolyte" mentality among those that remain. These players, usually support only one race or army, and know every rule and detail relating to it. If this sounds familiar, that is because that is what happened to Star Fleet Battles, the exception here being the price point. SFB was priced much lower and had a lower maintainence cost than most of the gW line.

In the end both SFB and GW set up a system that made it difficult if not impossible for newbies to join in. With GW it was the constant changing of the rules and the high price point of EVERYTHING related to the game. For Star Fleet Battles, it was the rules complexity. The tournement focus of GW rules like WH40K and fantasy don't help either. It makes it much harder to just play a "friendly game" as so many players are tournament oriented. In the end these factors are waht's killing GW. If they want to survive they will need to change radically.

Intersting takes from many viewpoints. Personally, as a career marketer and life-long hobbyist, my opinion is that GW is heading for a drastic collapse and soon (my prediction, within the next three years).

I know may will argue against this but consider:
• Few industries have shown the rapid rise and collapse of businesses as the gaming industry. Mainly because of the nature of the customer base which has aged but hasn't changed in twenty years.
• The greatest brand in the industry, and still in the industry, is D&D. Many thought TSR (remember them) was unassailable, but it proved not the case. Besides poor business practices, what were some of the causes for their demise? Repurposing content, poorly written and edited materials, wrong decisions on product mix (DrgonDice, SpellFire, etc.), and most importantly, an internal design focus that felt they know better of what the gamer wanted than they did. Result: Compete implostion of one of the strongest brands in the world (still rated in the top 25).

Sorry for those who thing GW's going to pull through, but in my experience, unless they take drastic steps, it isn't going to happen.

Internally and publicly they keep blaming their woes on LotR. However, I'm sure there other lines are suffering as well. Even GW fanboys aren't spending like they used to and more mature gamers, like myself, haven't bought a GW miniature in years as I don't see the value/price ratio at all sane and in some cases outright ridiculous(even though I don't have any problem affording them at their current prices).

If GW is going to fix this, the first thing they need to do is get a handle on their customers needs again and drop the arrogant 'we know better than everyone' attitude. Heck, they still believe they have a captured base and they continually tell that to investors. How naive can you be; they're not captured – they're leaving in droves. (But we'll just blame it on LotR).

Finally, the decisions being made are exactly why they are closer to the end than people realize. To turn the meager profit they did on the sales shows outright mismanagment in the company. But heck, we'll just raise prices again, make antoher 10% from customers who continue to by while we lose 15% from the customers who leave. Yeah, that math works.

I will continue to stick with my analysis because I feel it is coming. Although the tabletop game industry is down 8% worldwide, GW is trending below this. In other words, they are declining faster than the market and every year this happens there cost/income ratio becomes more disproportionate and continues to lead to absurd business decisions.

Whatever people think of GW, when you walk past a store at 6pm and you see lots of kids in there playing the game, you can see exactly why we need them in our hobby. If GW go then the frontline of recruiting youngsters will be gone, and before we know it, all wargamer's will be in their 50+'s and the hobby will be dying on its arse.