What is going on with Games Workshop’s Supply Chain!
As Games Workshop profits and stock are still sitting at all time highs, a strange undercurrent seems to be dragging the company down. What started as anecdotal reports from stores and customers, has turned into a full blown crisis. We first got hints of something not being right back in December when the Death Guard codex was pushed back to January, follow that up to this week and Games Workshop had a somewhat vague post on Warhammer Community to get ahead of leaks for Dark Eldar.
Games Workshop’s financial report in January alluding to all these problems, with the report having quite a few red flags. Games Workshop while producing 30% more products from 2019, still ran into a host of problems. It seems Games Workshop was busying automating (robots) and expanding all their warehouses. These growing pains didn’t seem to keep up with customer demand. Then we have Games Workshop building a new factory, while retrofitting their main one at the same time. What about Brexit which Games Workshop seems to still be processing the fine print of the trade arrangements, figuring out the best way to get products to the EU countries. Layered on top of all this is Covid.
This all to say Games Workshop has a lot of balls in the air and you can see why issues have arised. This is a lot of transition for a growing company that might have underestimated its growth. There is also an oddity in the report about cash on hand, while the report shows growing revenue, Games Workshop still goes on to talk about growing cash generation concerns. This might be because their entire retail channel has only 50% of stores even breaking even. Combined with capital investments, you can see why Games Workshop might be slowing production while they let Covid pass and stores are able to fully open. Since no matter how much independent retailers sell, Warhammer shops will always have the best profit margins for GW.
Then we have the question of China, which Games Workshop likes to never talk about in these reports. Books, terrain, and most hobby materials like paint are made in China for Games Workshop. Many reports from retailers and customers has been the terrible delays and wrong orders with these products. Unfortunately, China is on New Years holiday for most of February closing almost every factory. Even in the financial report Games Workshop makes note that one of the local British warehouses will be partially dedicated to producing and housing stock of hobby materials. This might also explains why Games Workshop is sending us the 9th edition repackaged kits for Dark Eldar ahead, because they are waiting on the new hobby line of products from China to have a proper launch. The supply problems in China are not only a Games Workshop issue, as anyone expecting to get a new PS5 or Xbox Series X are in the same boat, but with a different supply issue.
So the big question is when can we expect everything to return to normal?
Covid is of course the big elephant in the room. Covid rates in United States and the United Kingdom are surprisingly dropping fast, as both countries are also doing better than expected (a really low bar here) in vaccinating their population. Herd immunity should be in the UK by summer with the US by the fall 2021, if all the positive trends continue. Factory and warehouse upgrades for Games Workshop will be complete by April at May at the latest, which is perfect timing with Covid being under control. Games Workshop should want to wait for the supply chain to really under control by the time all UK Warhammer stores can fully open without issues. The best guess would be that these issues will continue until June at the earliest, but only if virus variants are manageable by the current vaccines and another surge doesn’t pop off.
So expect a lot more horror stories from consumers and retailers as Games Workshop tries to manage expectations, and keep us happy while we wait for orders even if they take a month to arrive for some.
Games Workshop Stock Market and Investment news for February 2021
Games Workshop Stock Market and Investment news for January 2021
New codex Compendium for 9th edition with updated information for Blood Angels and Death Guard included the new codexes and FAQs