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Wednesday, 5 January 2011

The Beginning of the End for Games Workshop?

Games Workshop have today issued a profit warning on the back of declining sales for the 6 months to 28th November.  In The Guardian an analyst revised his profit forecast from £17m for the year, down to £12m.  This analyst maintains that there is still long term growth to be had from GW, but I'm not so sure.  The city has responded by knocking 13% off the GW share price.

Personally, I think that unless GW can make substantial inroads into the computer and video game markets, they may be gone in as little as 5 years.  GW have pretty much reduced their range to games that require and entice players to get into the hobby of collecting and painting toy soldiers.  If they were just a manufacturer/distributor of their products, they might have been okay, as careful management would have allowed the business to expand and contract.  However, having a large chain of retail shops that sell nothing but GW product leaves them vulnerable to even small shifts in the market.  Other toy and games shops will have done exceptionally well this Christmas selling traditional board games, lego games and console/PC games, but GW has nothing to offer those customers. 

Twenty five years ago, Games Workshop was a specialist games shop which offered a great range of RPGs and board games with miniatures and the then still very new Warhammer rules.  I'm not bitter about the commercial direction they took and I certainly don't want to see the company fail and cost the UK hundreds more jobs.  Nontheless, I can't help thinking: if the empire that is GW plc had evolved differently, or had been split into separate divisions, I might still have reason to go into my local GW store as a gaming customer.


  1. Many thanks for posting this.

    Very interesting...

  2. I don't know, it is *only* a 4% drop in sales on the same period last year, and this Christmas has not only had the worst weather in the history of GW, but it is also the Christmas when tens of thousands of council workers received letters saying, "you are/might be sacked, and you might be re-hired on savagely cut wages and worse conditions", and linked to this is the prospect of unemployment hitting record highs when the cuts kick in, which will depress the wages an conditions of everyone else.

    Sure, it might be the end of GW, but I'd say that the 4% fall in sales has more to do with the economic climate and the freak weather, and the 13% fall in their valuation is a daft a reaction of 'the market' as the increasing share price of Blacks, based on an entirely weather-related 10% rise in sales.

  3. The problem is that the 4% drop is for 6 months sales up to 28th November, which discounts most of the bad weather. In retail a 4% drop is pretty bad. I believe the reaction on the stock market is in anticipation of an even bigger fall in sales over the Christmas period. My reasoning that this might mark the beginning of the end is that I'm not sure what GW can do to increase profit and/or turnover. That said, I am not a shareholder, and I've taken no more than a cursory look at the company's performance. In the short-term, GW's cashflow will be a key indicator.

    Of course, now my interest has been piqued I will keep an eye out for any breaking news.

  4. They will probably respond by going for more "one man stores" as favourably mentioned in that Graun article even though as a semi-regular customer of the EE it's the single thing that makes me think the whole operation is at death's door - when you can't staff your premises so that the place has to be locked up and shuttered so the single staff member can go to the toilet (as I've seen locally twice in as many months) it makes it look very marginal indeed.

    That said I can remember having the "GW can't last much longer" conversation in about 1990/91 with periodic reprises ever since.

  5. Ah, I am corrected - I thought it included the Christmas run-in. So yeah, that is pretty bad, especially as it includes the Warhammer 8e launch. So I take back what I wrote at your place, too Coop.

    Which worries me as I think that the collapse of GW could be a very bad thing for gaming indeed. We don't get an alternate history where GW continued stocking Call of Cthulhu, Traveller, etc., and where White Dwarf continued as a broad ranging gaming magazine. We lose the only gaming presence in many towns, certainly the only high-street gaming presence in most towns, and the number one recruiter of kids into hobbies that involve dice, strategy, complex rules, and the imagination.

    Bloody hell, you'd think that rather being terribly disappointed with the way that GW has turned out, that I worked for them.

  6. Maybe folks would buy more $3.00 miniatures as opposed to $15.00 ones.

    Maybe I'm an old cheapskate but 2 or 3 cool miniatures for $3.00 a pop seems like a lot better sales for GW as opposed to no $15.00 from someone like me.

  7. I wonder if we'll see them ditch the retail network and just carry on as a producer.

    Does anyone have any idea how much debt they're carrying?

  8. According to this article last summer they were debt free.


    However, I would imagine that with their sales peaking in December they probably need a big overdraft facility over the winter months.

    Anyway please excuse me while I close the blog for a few minutes so I can go to the toilet.

  9. Just to update this GW lost another 4% in today's trading. They report their half-year results on Jan 25th so I'll post them when they're released.