August 21, 2018 / 6:55 AM / 3 months ago

Game Digital's profit margins held back by tough preowned market

LONDON (Reuters) - Game Digital (GMDG.L), the British gaming products retailer 25 percent owned by Mike Ashley’s Sports Direct (SPD.L), on Tuesday cautioned that profit margins were being held back by a tough preowned market as it reported a small rise in full year sales.

The group said gross transaction value for the year to July 28 increased 1.8 percent to 907.2 million pounds ($1.16 billion), with a decline of 1.6 percent in the second half, to 320.4 million pounds.

“We have seen the trends of the first half continue during the last six months, with strong sales of lower-margin digital and hardware, and continued challenges in the preowned business that have impacted on the overall gross profit rate,” Game Digital said.

The firm is focussing on delivering cost savings in the UK in order to offset the sales mix impact on gross margin. It forecast a year end cash position of about 58 million pounds.

Game Digital agreed a deal in February to open gaming areas in some Sports Direct stores.

It said the work required to build and accelerate BELONG gaming zones in the next financial year has largely been completed.

The first new BELONG arena under the deal opened in Westfield Stratford, London, this month, with a second arena in Lakeside Thurrock, outside of London, set to open in September.

Shares in Game, down 51 percent so far this year, closed Monday at 27.6 pence, valuing the business at 47.5 million pounds.

($1 = 0.7841 pounds)

Reporting by James Davey, Editing by Paul Sandle

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