Much to my surprise Games Workshop announced their Half Year results four days earlier than expected. As much of the Internet digested this information many ran with the conclusion that GW had taken another massive hit to the financial groin. As it turns the devil is in the details and by comparison this report isn’t all that bad, but does have some warning signs folks should be on the look out for. Here is a link to the report.

HALF – YEARLY REPORT AND TRADING UPDATE

The details of the report were leaked a bit earlier by the Guardian news paper, with their summation.

Games Workshop fails to weave its magic at Christmas

As it was arm chair stock brokers and econ majors were quick to fire up biases and uneducated analysis of the report. As the day dragged on, the saner and brighter bulbs realized GW was “mostly” right on target with what they expected. In fact the report goes out of its way to show revenue at “constant currency” was higher than the same period last year.

Thanks to these constant warnings about exchange rates, GW set up investors for a soft landing. The constant currency point is repeated as much as possible because blaming forces out of ones control is better than ones in your control.

Now everything isn’t roses, far from it, if GW long-term strategy is to be believed then this is the time for a turnaround. Going forward, GW is out of excuses they cut all the fat they could and profits will be determined by growing the player base and less about extracting money from existing customers growing wary of ever rising prices. Models sales seemed to increased, but books and digital offerings declined. GW is now offering cheaper digital books and alternative ways to purchase them to make up for the decline. Royalties are up as we saw tons of new mobile games hit the market in 2015

The other big thing of note is independent retails picked up the slack in sales from the lackluster GW store locations. This isn’t surpising as many feel the inane one-man story concept is ripe for failure. GW is so concerned they even hired an expert to help. The only problem is GW still believes hiring good managers is the key, when most likely a flawed retail strategy is to blame. In the report GW is experimenting with larger stores, if they show profit and growth expect a change in retail focus.

The warning about Christmas sales is also a problem, when you think about it though it makes sense. The holiday bundles were pretty lackluster even with great savings, and the only other new releases were from Age of Sigmar for a total of three new kits. Then you had a terrible digital advent calendar. Calth wasn’t even strong enough to make the holiday bright, and then you introduce the fantastic New Year, New Army boxes after the holiday! These strategic misses should never happen, but they did.

Now for the stock price itself, how did it react to the news?

The one-two punch of China insanity, a dividend being cut almost in half and you can see why investors would move away from GW. You are looking at almost 10% drop the day of report released, by coming on a Friday it also soften a worse blow coming mid-week. I don’t expect GW to overreact from this report as it seems well within the bubble they created for themselves, and we haven’t seen signs of panic. Now GW does like to surprise us, but so far under the Kevin Roundtree tenure as CEO he and the company seem to be playing it cool.