Games Workshop hit by falling sales

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Fantasy war games retailer Games Workshop said pre-tax profits were likely to be below expectations

Fantasy war games retailer Games Workshop has warned on annual profits after it revealed a downturn in sales towards the end of 2010.

The company, which makes collectable figurines for Warhammer and Lord of the Rings battle games, said pre-tax profits for the year to May were likely to be below market expectations of about £17 million.

Shares slid by 14% after sales fell 4% in the half-year to the end of November, suggesting a sharp drop in sales since the company last updated the market in September.

Current trading conditions mean it is unlikely to make up the shortfall over the second half of the financial year.

Julian Tolley, an analyst at HB Markets, issued a sell rating on the stock and estimated that the sales weakness might reduce profits by 10% in the year.

He said: “Back in September the first quarter update was trading in line with expectations, so the downturn has been abrupt in the second quarter and is ongoing.”

The Nottingham-based company added that it continues to control its gross profit margin and costs.

The chain was established in 1975 by gaming enthusiasts from London and has some 380 stores in locations including the UK, US and Australia.

The majority of its models are made in Nottingham and Memphis. Games Workshop also publishes a monthly hobby magazine called White Dwarf available in five languages.

It made a pre-tax loss in 2007 after the popularity of its Lord of the Rings characters waned and it reduced the size of its store estate. But it has grown its pre-tax profits every year since then and made £16.1 million in the year ending May 2010.

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