Is Game about to face the kill screen?

The struggling games retailer has suspended trading on the London Stock Exchange and a pre-pack administration is on the way.

by Rebecca Burn-Callander
Last Updated: 19 Aug 2013
It looks like Game’s days of leveling up are over. The firm, which operates 1,300 stores worldwide, is in court this morning requesting an administrator to prepare the firm for pre-pack, and its shares have now been pulled off the trading screens as ‘there is no equity value left in the group’.

The move follows weeks of frustrated talks with white knights and lenders as losses mount at the videogames retailer. Game is due to pay a £21m rent bill on Sunday, and a £12m wage bill at the end of the month. It also owes more than £10m in VAT and £40m to suppliers. But there’s just no cash left to pay these spiraling costs. And any potential rescuer will have to have very deep pockets: Game is looking to raise some £180m to cover the shortfall and get back in the fray.

There is one possible deal still in play, however. Private equity firm OpCapita, which picked up Comet for £2 back in November, is in talks with Game’s main lender, taxpayer-backed Royal Bank of Scotland. Will they be the ones to buy it out of administration?

Game’s 600 UK stores are still open for business but stock is running low. Many of the firm’s suppliers have been unwilling to renegotiate terms and allow Game more time to pay – or, indeed a discount. That means Game’s loyal customers are having to go elsewhere for their copy of Mass Effect 3, or Resident Evil: Operation Raccoon City. This seems rather churlish, not to mention counterproductive. If Game goes bust, that’s a whole distribution channel gone. One that was pulling in £90m in profit just two years ago.

But while Game suffers, other retailers are ‘fragging’ the competiton. Take Sainsbury’s, which has clawed yet more market share away from leader Tesco. The supermarket, now the third largest in the UK, reckons it’s also now the fastest-growing online grocer in the UK. Online trading is up by a fifth, with 165,000 customers filling their online baskets at Sainsbury’s every week. Turnover at its convenience stores is also up 20% off the back of new store openings. And like-for-like revenues, a true economic barometer for any business, are also up by 2.6% for the 10 weeks to March 17 (excluding fuel).

Over in the world of fashion, Ted Baker is also in a league of its own. The UK-based firm has reported a 14% rise in retail sales, with sales in Britain and the rest of Europe up 8.7% to £148.6m. Profits are only slightly up, however, due to weighty expansion costs. Still, 0.1% is better than nothing: £24.3m trousered for the year. And opportunity knocks abroad too: turnover in the US has skyrocketed by 69% to $34.9m and Ted Baker is opening a load of new stores over there and in Canada to cope with demand.

The fashion retailer, high on growth hormones, is proposing a dividend of 23.4p this year, 13.6% higher than last year. It’s a world away from the goings-on at Game, where 10,000 staff wait to hear whether their jobs are secure. A pre-pack administration could see the firm shed 1,000 of its outlets and two thirds of its employees. It is in this financial climate that the Chancellor announces his Budget today…

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