The high street games retailer Game fell headlong into administration today leaving thousands of high street workers faced with losing their jobs and millions of pounds still outstanding to its debtors.
The group, which has 609 stores and 6,000 staff in the UK, has effectively run out of cash and rumour has it that it was unable to meet even its basic rent and wage payments which were due this week.
Staff took to technology websites and forums to express their anger and disappointment at what one called a ’horrible situation’.
The difficulties experienced by Game are testament to the current ‘age of austerity’ marking a squeeze on living costs and a change in shopping habits and games technology. Additionally no further consoles have been released of late so some pundits have pointed at the lack any new technology to get games players excited and into shops.
The retailer had a £21m rent bill due last Sunday and faces an eye watering £12m wage bill this weekend. It is estimated that another £40million owed to suppliers and £10m in VAT seems unlikely be paid.
Administrators said the stores would remain open as it attempts to find a buyer for the business as a growing concern. It seems certain that hundreds of stores will go and thousands of employees will be out of work within weeks.
While the bulk of the Game business is in the UK, with 609 stores and 6,000 staff, there are around 700 other outlets and 7,000 staff in sister chains overseas.
The fate of the company is now in the hands of administrators at PwC. Speaking to the press today – Mike Jervis, joint administrator and partner at PwC, suggested the firm had ‘simply run out of cash’.
Mr Jervis said: ‘The group has faced serious cash-flow and profit issues over the recent past. It also has suffered from high fixed costs, an ambitious international roll-out and fluctuating working capital requirements.’
Poor sales at Christmas led the games giant to signal that losses for the year to the end of January were likely to be around £18million.
However, Mr Jervis insisted there is still demand for a mainstream high street computer games retailer.
‘We believe that there is room for a specialist game retailer in the territories in which it operates, including its biggest one, the UK,’ he said.
‘As a result we are hopeful that a going concern sale of the business is achievable.’
It is understood that the latest financial crisis was triggered when one of Game’s main lenders, the taxpayer-backed Royal Bank of Scotland, objected to the terms of a rescue deal with private equity firm OpCapita, which recently bought electrical goods retailer Comet.
Game has suffered dire trading in recent months, which forced it to ask suppliers for more generous trading terms. However, several responded by deciding to protect themselves by refusing to supply the retailer with any new releases, such as Mass Effect 3 and Street Fighter X Tekken.
The group has also been battered by competition from cheaper rivals on the internet, such as Amazon and Play.com, and the major supermarkets.
Separately, many people now download game Apps direct to tablets or smart phones, rather than buying software to be loaded in to consoles like the PlayStation, xBox on Nintendo Wii.
If you visit Games’s official website you’ll find it “down for maintenance” with a message explaining the company’s gone into administration, who’s been appointed to handle the process and a disclaimer that the company is “currently reviewing and processing orders placed on this website.”
The failure represents the biggest British retail collapse since Woolworths and its 815 stores went under at the end of 2008.