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GW Financials
nealhunt	Post subject: GW Financials Posted: Thu Mar 23, 2006 6:12 pm
Purestrain Joined: Thu Feb 13, 2003 10:52 pm Posts: 9617 Location: Nashville, TN, USA	Hey, the commonly recurring "no support for epic" thread on the SG boards prompted me to go look at the investor relations section of the GW website.  The Nov 05 interim report is out. Highlights: Revenues continue to decline.  Most notably, the GWUS market is falling as independent retailers are ceasing to carry GW. Margins are holding steady despite reduction in production, which they are spinning as good production management in the report, but which I think probably more accurately represents the continued price hikes keeping margins up despite loss of economies of scale (from lower production levels). Much of the profit was eaten up by capital improvements, i.e. opening stores to try to compensate for US retailers bailing on them. It openly acknowledges the LotR "bubble" and sales on the line are down 20% year-over-year, despite the continued production of new models (like the Easterlings armies). If I were an investor (and I was a licensed stock broker), I would probably have sold out after last year's report.  After November's report, I'd be gone ASAP. I continue to believe that they have lost sight of the fact that what made GW into a real company was dominance of the market, not profit margins.  They need to keep market share and total revenue.  The net profits will come. _________________ Neal
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Dwarf Supreme	Post subject: GW Financials Posted: Thu Mar 23, 2006 6:24 pm
Brood Brother Joined: Fri May 20, 2005 8:45 pm Posts: 11147 Location: Canton, CT, USA	Quote (nealhunt @ 23 Mar. 2006 (17:12)) I continue to believe that they have lost sight of the fact that what made GW into a real company was dominance of the market, not profit margins. ?They need to keep market share and total revenue. ?The net profits will come. I couldn't agree with you more, neal. Thanks for the info. It still amazes me that the "braintrust" at GW thought that interest in LotR would last beyond The Return of the King. LotrR has become a sink hole. Given the price increase, it's no wonder so many independent retailers have dropped GW products, which of course perpetuates a vicious cycle. I wonder if GW will ever return to the company it used to be?    I doubt it. _________________ "I don't believe in destiny or the guiding hand of fate." N. Peart
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Falesh	Post subject: GW Financials Posted: Thu Mar 23, 2006 6:33 pm
Brood Brother Joined: Tue Aug 12, 2003 4:35 pm Posts: 313	I got into GW through their diversity of games. I started with HeroQuest, then moved onto their other games, Space Hulk, 40K, FB, Space Marine, Blood Bowl, etc... I believe that in the long run they will lose profits if they keep trying to specialise so much on the big couple of games at the expense of the high quality diversity of games represented by Specialist Games (also bringing back Space Hulk would help too). _________________ Easy printing Reference Sheets and Army Lists Pics of my mini's John Baldock
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minitj	Post subject: GW Financials Posted: Thu Mar 23, 2006 7:27 pm
Brood Brother Joined: Mon Nov 28, 2005 7:11 pm Posts: 215 Location: UK	My first game was space marine, followed by WFB, WH40K, blood bowl and now back to E:A I think they just take themselves far too seriously, and also expect people to pay whatever they ask! _________________ Need a painted army? [url=http://www.iwantapaintedarmy.co.uk]www.iwantapaintedarmcy.co.uk[/url]
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Dwarf Supreme	Post subject: GW Financials Posted: Thu Mar 23, 2006 7:37 pm
Brood Brother Joined: Fri May 20, 2005 8:45 pm Posts: 11147 Location: Canton, CT, USA	Quote (minitj @ 23 Mar. 2006 (18:27)) I think they ... expect people to pay whatever they ask! Ain't that the truth. In my case, GW is sadly mistaken. The last time I paid the full retail price was when I bought the E40k boxed set. However, I might breakdown and pay full price for some Feral Orks.   _________________ "I don't believe in destiny or the guiding hand of fate." N. Peart
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javelin98

Post subject: GW Financials Posted: Thu Mar 23, 2006 7:46 pm

Brood Brother Joined: Tue Dec 20, 2005 6:39 am Posts: 791 Location: Spokane, WA, USA

Revenues continue to decline.  Most notably, the GWUS market is falling as independent retailers are ceasing to carry GW. Yep.  I have to wonder why GW-US seems to have such a much more antagonistic relationship with indie stores than is the case with GW-UK or GW-CA.  My FLGS now only stocks one of each GW item and only replaces them as they sell;  the owner says that people are just refusing to pay GW's prices anymore.  LOTR was the last GW product that sold well in his shop;  everything else is Clicky stuff now.  Flames of War and A&A are far outpacing GW in his shop.  He laughed when I mentioned carrying Epic. Margins are holding steady despite reduction in production, which they are spinning as good production management in the report, but which I think probably more accurately represents the continued price hikes keeping margins up despite loss of economies of scale (from lower production levels).

An unsustainable paradox, I'm afraid, but you've hit it spot on -- the margins are higher but volume is lower.  This short-term strategy hurts GW in the long run, as the higher prices drive people away and sales continue to drop.  Another brand manager might be tempted to cut prices to increase sales, but I have a hunch that Tom Kirby et. al. will simply try the blood-from-a-turnip trick that kept margins up in '05.  Sadly, this is a self-defeating strategy.

Much of the profit was eaten up by capital improvements, i.e. opening stores to try to compensate for US retailers bailing on them.

Capital improvement is a good thing -- the new CAD system GW is supposed to be using should be a no-brainer.  That said, I firmly disagree with the idea of GW trying to open its own chain of stores.  Wizards of the Coast tried it and got kicked in the teeth.  

Indie retailers ought to be GW's best friend.  They've already absorbed the start-up outlay in real estate and equipment, have an owner/manager who knows the local customer base intimately, and can survive in smaller locales that couldn't support a GW store's labor costs.  Indie stores have tax advantages as well, often operating under laws favorable to small business that GW can't take advantage of.  Not to mention that the US is *huge* compared to the UK;  my closest GW store is three hundred miles away.  The next closest store after that is over nine hundred miles away!  There's no way GW can hope to achieve the geographical saturation that the indie stores have already achieved.

If I were king of the GW-US world, I'd close all the GW stores except a few key "showroom" stores in big markets like New York, LA, Seattle, Dallas, Chicago, Atlanta, and Denver.  Then I'd open up the pipeline to indie stores with favorable terms, flexible ordering and stocking arrangements, and the like.  With all the savings from cutting retail staff, I'd hire eight or ten travelling demonstration teams to travel to the various indie stores and put on demo games to spur interest in the product.

It openly acknowledges the LotR "bubble" and sales on the line are down 20% year-over-year, despite the continued production of new models (like the Easterlings armies).

Yeah... funny how every gaming-related discussion board saw this coming two or three years ago but no one on the Board of Directors clued in.  The money from LOTR should have gone to fund and grow new releases to replace the LOTR line.  Sustainability may be a buzz-word, but it's a good buzz-word!

They need to keep market share and total revenue.  The net profits will come.

Hear, hear!  One of the truest things ever spoken.  Almost seems like fundamental economics, yet it's a concept that hasn't found much purchase in Nottingham.