Gaming retailer Game Digital (GMD) is hoping the highly anticipated Nintendo Switch console will reignite sales growth after struggling to capitalise over its peak Christmas sales period.

Revenues declined 6.3% in the 23 weeks to 7 January 2017, and fell 1.6% in the last three weeks of that period, with online retail rivals continuing to eat into its market share. Game currently has net cash of £68m, down from £105m in 2016.

This leaves the company desperately pinning its hopes on gaming device maker Nintendo. Game reports strong customer pre-orders for the new Nintendo Switch console ahead of its official release on 3 March.

A potential spanner in the works is that Nintendo isn't able to guarantee that enough devices will be available. That could leave some customers high, dry and Switch-less even if they had pre-paid, a potential PR disaster.

Game graphGame is struggling with the long-run problems of softening demand in the UK as buyers shop for the best deals around. That's been the case for at least three years, effectively since the last generation Xbox and PlayStation consoles were launched.

At least the company is doing better in Spain, reporting an 8.5% increase in sales, in local currency, during the 23 week trading period. Last year Spain accounted for more than 28% of group revenue, versus the UK's 71%.

Simon Davies, analyst at broker Canaccord Genuity, has slashed forecasts that already anticipated substantial profits declines this year to 31 July. The analyst now expects pre-tax profit of just £8.1m instead of the £10.1m he had previously pencilled in. Last year's equivalent figure was £16.4m.

Forecasts also reflect investment needed to fund Game's new in-store gaming areas strategy, which is expected to accelerate. Game hopes that by expanding into the competitive gaming experiences sector it can find new revenues to plug current profit growth holes.

Canaccord's Davies believes the performance in Spain is reason for investors to remain positive, especially given the benefits of converting that euro income into currently battered pounds.

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Issue Date: 18 Jan 2017