Game Digital plc (lon:gmd)
Game Digital Does Mike Ashley Make A Difference


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Title: Game Digital Does Mike Ashley Make A Difference
Company: GMD - Game Digital plc
Share Price Then: 28p
Author: Ian Smith
Date: Mon 17 Jul 2017
Comments: A couple of days ago I was unsure about Game Digital after poor profits and a big share price drop, then Mike Ashley of Sports Direct fame has popped up with a 26% holding.

So does this make any difference, at first glance it does why spend £10m on a business that you don't think can become a success? However £10m is pocket change in this case so it may very well be a case of "how about giving this a try".

As standalone stores this share purchase doesn't seem to change anything except possibly give access to development funds at a more preferential rate.

I find it very easy to see Games Digital shops being closed and moved into Sports Direct, there are enough towns where they are both present for this to be viable, it may also be possible for the far fewer Debenhams stores to be persuaded that they should have a Games Digital area.

Do many Sports Direct shops seem to have a too diverse range of products, just how many different trainers do you need to offer? It is almost as if they have the space and just wanted a way to fill it, but filling the space with a Game Store brings in a whole new audience without alienating many of either brands customers.

There has been a small recovery but the volumes suggest that this is private traders hoping for a quick recovery in the share price, which is risky as there is an easy to see 30% drop.
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Previous Commentaries On Game Digital plc
Date Share Price Author Commentary
Thu 06 Jul 201722pIan Smith

Game Digital 30% Down In One Day

Game Digital is a high street retailer of PC and console games who recent lost a third of their value (30th June 2017) after stating that they expected "the full year to be substantially below previous expectations."

Game pretty much went broke in 2012, was saved by private equity funding, relisted on 2014 and have gone downhill since then.

Despite paying dividends in 2015/2016 and early 2017 there has rarely been optimism one the results started coming in.

As I see it the games market has split.

  1. There is the hard core gamers with expensive consoles and everything on line.

  2. Wii typer users, much more casual gamers with cheaper consoles and games who are likely to buy the console on a whim.

If the second group takes to the recent launchs of classic/retro/out of date hardware such as the SNES Classic and the Atari Retro then we have a new group who will be buying in store.

However it may be that the NES classic where demand outstripped supply was the peak of this market. I have a suspicion that the retro market may now be one of those where everyone goes "ooh that;s cool, do you remember...." and then leaves the shop.

It is also possible that people who lost interest in consoles after the PS 1, people who are now 20 years older and in well paying jobs may go the shop intending to buy a SNES classic and actually end up buying a PS4 or an X Box One X.

If this sounds unlikely Rolex dealers often report something similar, people come into the shop thinking that they would like a Rolex but can't really afford one. Then they look at the options and think "what the heck, I'll spend the extra and get what I really want".

VR gaming is also new to most non gamers, again an opportunity to get well healed customers into store, they call it "BELONG" and the concept has worked well for the role playing Games Workshop.

However with a market cap of about £40m and a large number of retail share holders it is not at all clear that the share price is stable at a new lower level.