British video games retailer Game Group reported better than expected recent trading along with a 67 per cent jump in full-year profit, adding to growing optimism in the sector and sending its shares up to 18 per cent higher.
"Current trading performance is ahead of our expectations and this is particularly pleasing when set against the double-digit growth achieved last year," said chairman Peter Lewis.
Game said like-for-like sales fell 6.3 per cent in the 11 weeks to April 18th, well ahead of some analyst forecasts of a fall of over 10 per cent, while gross margins were up around 150 basis points.
Game shares, which have lost a third of their value over the past year, underperforming the FTSE All Share General Retailers index by 24 per cent, were up 26 pence, or 15.9 per cent, at 191 pence at 9.55am, valuing the business at £670 million.
The group's positive update came as British telecoms and retail group Carphone Warehouse beat fourth-quarter customer growth forecasts, and Citigroup raised its investment ratings and price targets on a raft of British retailers.
Game, which trades from 1,340 stores, concessions and franchises in nine European countries and Australia, made a pretax profit before non-recurring costs of £126.2 million ($183 million) for the 53 weeks to January 31st.
That compared with company guidance of "not less than £122 million", analysts' consensus forecast of £124 million according to Reuters' Estimates, and £75.5 million in 2008-09.
Turnover increased 32 per cent to £1.97 billion, with like-for-like sales up 8.8 per cent and gross margin up 140 basis points to just over 26 per cent as more higher margin software was sold.
"This was in the context of an unprecedented line up of new (software) releases and rapid growth of console ownership," Chief Executive Lisa Morgan told reporters, noting the installed base of third generation consoles (Playstation 3, Xbox 360 and Wii) is now over 22 million units in the UK, 9 million ahead of this time last year.
Video gaming, seen as a more affordable alternative to many other family leisure activities, is one of a few areas that have bucked the economic downturn.
Game, which raised its dividend 25 per cent to 5.5 pence and ended the year with net cash of £81.4 million s, said it was confident in the outlook for the year to end-January 2010.
Reuters