Financial analyst worried about sales, stock value GW

Consultant Beddard gloomy, Priestly pedantic

My favorite business analyst Richard Beddard, investor and games corp specialist, has doubts about GW’s most recent financial report. He wrote in his January column:

Operating profit was flat too, although it was rescued by royalty income from other firms, for example app and computer game producers who use Games Workshop’s fantasy worlds. Profit from the sale of miniatures and games, the company’s core business, fell 15%.

Irritatingly, Games Workshop didn’t provide an explanation, which is surprising since, in its previous full-year results, it had promised a sales drive.

Retail is not doing well, in fact worse than 2014

 its retail channel made a loss of £2.5m, more than double the loss it made for the same period the previous year (…) [Games Workshop] just completed a multi-year store rationalisation program, relocating to smaller, cheaper premises, and converting stores into low-cost one-man operations. The strategy was a response to a period of expansion when higher costs almost completely stymied profit, and it successfully restored profitability at Games Workshop

He doubts the presumed success formula of one man stores and he is worried about Age of Sigmar sales results:

Kevin Rountree, the company’s chief executive, has previously said improvements in sales depend on recruiting the right store managers, and that failing to do so is the biggest risk facing Games Workshop. He has recruited a recruitment specialist to help him.

Maybe that’s all there is to it. But maybe the company can’t recruit managers of sufficient calibre because running a one-man store is too much work for one man. Maybe one man cannot show people how to model, run games, and serve paying customers at the same time. Trials of larger multi-man stores in Sydney, Munich, Paris and Copenhagen suggest, at least for locations where there are lots of customers, one man stores are not the answer.

I also worry that despite the unsubstantiated claim that Games Workshop has launched some “great new products”, the company’s new version of Warhammer, Warhammer Age of Sigmar, is not doing as well as hoped.

He thinks that GW fails to recruit new customers. He writes that the strategy of  “profitable stores in less popular locations” in a “more competitive world” may be “oxymoronic”. GW’s  stock value is overrated, he thinks.

The company routinely denies competitive threats and aggressively squashes business that steal its intellectual property, but the longer it fails to lift revenue profitably the more credible these alternate realities become.

Full story: here.

Tuomas Pirinen reacted on Facebook. He worked as a chief designer for GW. He agrees with Beddard en has on his Facebook page a nice exchange with ex-GW-employee Geof Bushill, a pedantic GW-designer Rick Priestley en former GW-studio boss Dews. 

Pirinen posted:

 it is clear that the current approach is not generating growth and expansion of the hobby. It could of course be down to competition, but the magic of the huge growth curve from 1990 to 2003 just isn’t there any more (…) 

Bushill reacted:

Lord of the Ring was the major factor. $211 million movie franchise with adverts and the people swarmed in. The end of the series in late ’03 saw the start of the decline. What GW did not do is see it coming. They assumed that kind of growth would continue. I believe the fact it hasn’t bounced back successfully is the reduction in the staff (yes they had to cut cost because they didn’t plan for the fall off) those guys who built the company are on the whole not there anymore which has meant the decline into one man stores and increased pricing.

Priestley, praised by Pirinen as ‘instrumental’ for GW’s success, wrote about his years as studio chief (warning: he sounds self-satisfied):

Actually… although I’m widely known as a Games Designer by 1991-2 I was running the Design Studio (60+ staff) and responsible for developing the whole product line – I handed over to Robin Dews in the later 90’s but was still head of the product development – until the very end of the 90s/early 2000s. So I was basically responsible for all of GW’s ‘product offer’ – as they would call it these days – roughly 1990-2000 – that’s the bit of the graph that goes from about 10M to about 75M! Happy days indeed

His successor Robin Dews, looked back:

 I have to say that the real magic of those years was that the Studio was shielded and protected from the demands of the Sales and (later…) Manufacturing parts of the business and so was free to create exciting and innovative games and miniatures that have never been equalled by GW. For sure…they do clever stuff with plastic these days, but I am talking about genuine excitement and innovation rather then profit and iteration!

Maybe GW’s demise however is causes by other reasons as well. A veteran player AJG reacted to Beddard’s article:

The focus over the last decade for myself and other gamer’s/hobbyists I know has been a move away from the multi army/collection mass battle games to the smaller skirmish games to now self contained board games. This is reflected too in the miniatures we are buying from the big multi-part plastic kits and paiting/modelling to now investing in pre-painted/pre-built and ready to go out of the box.

As an example i have recently picked up ‘Star Wars Imperial Assault’ by Fantasy Flights. The initial appeal was the IP for this game but as a complete in the box purchase with scenarios, miniatures and role playing element. I have become hooked on the game for its depth, the fun, ease of play and possible ways to expand or evolve it too. Recent purchases have been in the self contained expansions to include into the main game and several of the allies and mercenary packs.

It all boils down though to the time and with this type or product I can literally with very little effort turn up to a venue, open the box, build the map from the card tiles, use the pre-built miniatures and rules, play the game then pack up when im done in a short space of time….all for £70 as complete experience.

Familiar?

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