Poor Christmas leads to Game Group loan breach fears
Game Group has warned that a fall in sales over the Christmas period could result in it breaching its banking convenants.
The games retailer’s total sales in the eight weeks to 7 January fell 14.7% from a year earlier. Sales at stores in the UK and Ireland were down 17.6% from a year earlier, while the international division’s sales were down 12%.
The group also said that promotional activity had impacted gross margins over Christmas and full year gross margins would now be down by approximately 190 basis points.
In statement issued today Game said: “The Group currently remains compliant with its loan covenants. However, the difficult market conditions raise the likelihood that it will not meet its EBITDA covenants (fixed charge coverage and leverage) when they are tested on 27 February 2012 for the period to 31 January 2012.”
The group said it continues to be in regular and constructive dialogue with its lenders, who remain supportive.
Ian Shepherd, Game CEO said: “Our industry had an incredibly tough 2011, and so did we. We remain the market leader and have a clear strategy which will return the business to growth. We are adapting to the changing market and are well prepared for the next hardware cycle.”
