Hi, it's me, I just shortened my handle, but still looking at length at GW's financial reports. Half-year report just out:
One year ago, I agreed with 8th ed 40k rumours, and went further to anticipate some sort of "Season of War"-like summer campaign for 8th ed, and suggested GW stock was a: BUY. I was right. A few months ago (Sept) I anticipated GW revenue would go up 40%+.
It turns out if anything my estimate was too conservative. At this half-year milestone, GW revenue is up +53% year-on-year. That's no small feat, considering the year BEFORE they had already grown 28%, so realise it's a high bar on top of a high bar.
What's more impressive, and something we suspected, is that GW has surprisingly low marginal costs, because while revenue went up 53%, their profits shot up +181%. Just so it's clear that's not a typo, that's ONE HUNDRED AND EIGHTY ONE percent.
Just in case you want to check my previous claims about my predictions last year, here was my post. I'll mention one related point later:
I just want to remind you of some things that crossed my mind as I flipped through the report.
- remember this isn't a press release or a brochure. GW HAS to release this for shareholder and tax purposes, so this isn't just fluff
- the +181% increase reminded me of how the share price went up about +170%-ish a few weeks back. Just a number in the back of my head
- these numbers measure from June 1 to Nov 26 (they need some time to compile report), so doesn't really include the Christmas sales spike
The most significant thing I observed was where the growth was highest. No doubt there was huge growth, but it's always interesting to note if there was any area where growth was higher than others, because they reveal what numbers (and often the CEO) won't tell you.
To compare, about one year ago I made a huge point about how Place & Promotion at Trade (i.e. FLGS) and Retail (i.e. Warhammer Stores) showed HIGHER growth than Mail Order. I attributed to that as they were really pushing Age of Sigmar with the General's Handbook that fixed some of the issues with the game, then drove it home with a campaign event that...guess what...was played at those places with results entered there, too.
This year, growth across all 3 segments of Trade (+63%), Retail (+35%), Mail Order (+71%), suggests it was more Product-driven I think...the Product being 8th ed and Primaris/Death Guard/etc. I say this because GW's Retail (i.e. Warhammer Stores) are...though we may mock red shirts...the most dedicated sales force for GW. So it wasn't salesmanship or demos or a summer campaign that drove the growth.
IMPORTANT EDIT - the issue with Retail i.e. Warhammer Stores being the slowest growing segment has been gnawing at me.
I'm returning to this, looking at why Retail is actually lower...and I'm thinking it's a Happy Problem (partly because 35% is miracle-like growth regardless). Retail represents existing customers, the regulars that go to the Warhammer Stores, and the majority of us were going to buy 8th ed anyway. The Channels that are FLGS and Mail Order might represent NEW or LAPSED customers that hadn't thought about 40k until recently.
I'm actually very happy about that, increasing sales not just because of a near-"compulsory" upgrade to 8th, but more people are interested in 40k. And Necromunda, because that falls in the timeframe of this report. (I suspect the little bump in Mail Order includes FW growing with Blood Bowl.)
ALTERNATE TAKE - the other way to look at this is that Retail segment is smaller because customers are UNDER-served. What that means is there's so many Warhammer Stores out there; a lot were newly opened, a lot were closed. They can only cover so much territory. Trades i.e. FLGS covers a larger area, there's more stores, so they were able to capture greater growth. The closest thing without boundaries is Mail Order; anyone can shop online, even if they don't live near a Warhammer Store or a FLGS.
It's not really a problem because Retail is expensive, the least profitable segment, rent is high, red shirts are an overhead (I love my red shirt, but he's got a family to feed). But this does show a hard upper bound, it's "money left on the table". That said...GW's actually hit an upper bound!
TL;DR - Last year showed AoS really needed to be pushed. This year showed people were ready to buy 40k 8th. And boy, did we.
P.S. I long had this gut feel...not very good modern marketing, where everything is data-driven...but I always felt of GW customers maybe 1/3 were Warhammer Fantasy fans and 2/3 were 40k fans. Looking at how much higher the growth was, I want to revise that to maybe only 1/4 are Fantasy fans and 3/4 are 40k fans, or that 40k fans just buy a frag-ton more. Probably a little bit of both, I'm not bashing Fantasy as I was the the big AoS Season of War player at my FLGS, and there WERE some AoS things introduced these past 6 months, but something to keep in mind.
UPDATE - a lot of people mentioned supply chain issues i.e. GW had production problems, electricity grid, etc.
Welp, it turns out, this half-year GW showed their plant, property, equipment grew about 10% (more than 2 million pounds, they invested a almost 5 million pounds but I guess some of it was to replace old stuff) after a steady decline/cost-cutting for the last 10 years. They also seem to have taken a loan? It looks like they borrowed money to expand manufacturing capacity already, and now they have the cash to expand even further. It's good news but also necessary because, forgot about growing, they just had a huge growth spurt, but just maintaining this level takes extra capacity I should think. And it looks like GW's investing in the future.
Edited by N1SB, 13 January 2018 - 02:14 PM.