GAME Group struggles under financial pressure

The GAME Group - which runs high-street stores GAME and Gamestation, as well as their online equivalents - is facing an uncertain future as a sales slump leads to a financial crisis.

In its post-Christmas financial report, the company had to confess that a 17.6 per cent drop in sales for the period would mean the potential to miss its financial targets due at the end of this month. Should the targets be missed, lenders would likely review the company's credit situation in a way that would put its very future in jeopardy.

When industry publication MCV reviewed the situation at the start of the year, things looked bleak: the 17.6 per cent slump for the eight-week Christmas period - traditionally one of the busiest for high-street retailers - is at the head of an overall 11.9 per cent drop in sales for the year so far.

Although the company's online offerings grew 3.9 per cent over the Christmas period, it wasn't enough to make up the shortfall. Blaming an overall decline in the UK games market, which has dropped 13 per cent so far this year, chief executive Ian Shepherd admitted at the time 'our industry has had an incredibly tough 2011, and so did we.'

Things look significantly more bleak than Shepherd has been willing to admit, however. In a post to gaming forum RLLMUK, a Gamestation store manager claims that the entire infrastructure is crumbling as the company's credit lines run dry.

'Our wages didn't go through first thing on the 31st - we get paid on the last day of each month,' the sensibly anonymous manager claims. 'I was rather irate to say the least, and we received a store email to say there had been issues with the banks, and that all managers and assistant managers would get their money at some point during the day.'

The manager goes on to claim: 'What we get instead is [being told] to stop taking pre-orders for all SKUs of Mass Effect, and, wait for it, Neverdead, as that game has reached the company's allocation. Now I'm not berating the quality of said game, but I very much doubt the pre-orders were in full flow for that title. Which would imply that the company is getting next to none of that SKU. And that would appear to be the case for MGS [Metal Gear Solid: HD Collection], which we were told it had just fullfilled its allocation too.'

GAME has provided the following statement regarding its current situation, along with the rumour that it is planning to close its overseas divisions: 'In response to press speculation the GAME Group plc confirms that it is in ongoing dialogue with its lending syndicate to reach agreement on revised terms for its facilities. As part of these discussions, the lending syndicate is reviewing a strategic plan of the company which includes a review of its overseas operations. A further announcement will be provided once discussions with its lending syndicate have concluded.'

Additionally, MCV reports that claims of stock shortages and staff wage delays are untrue, although the company has yet to make an official statement to this end.

The unrest surrounding the company has its customers antsy, however. Many are considering cancelling pre-orders for Sony's upcoming PlayStation Vita hand-held - thanks in part to a cheaper deal from online retailer Amazon - while those with gift vouchers or store credit are wondering if waiting is worth the risk.

Do you think the GAME Group can survive the coming months, or are its days numbered? Share your thoughts over in the forums.