Games Workshop has announced its sales figures for its fiscal year 2006, which ended on May 29th, and they are not pretty.  Total sales declined 16.7% from 136.6 million pounds in 2005 to 115.2 million pounds in 2006, and operating profits were down a whopping 70.6%. 

Unlike last year when the drop-off from 2004 to 2005 was blamed on the decline of the Lord of the Rings license (see 'Games Workshop's Sales, Profits Decline') and the company trumpeted a 'stay-the-course' policy, this time around Games Workshop management has implemented a number of cost-cutting measures. In the words of Chairman and Chief Executive Thomas Kirby, 'in a bad year the management and staff of Games Workshop have taken the opportunity to re-establish a lean and efficient company.'

Sales in the U.S. and Canada declined by nearly nine percent in 2006, which is similar to the drop in North American sales in 2005, and better than Games Workshop's worldwide performance in 2006.  Worldwide sales were actually up slightly in the second half of 2006, a strong contrast to the second half decline in 2005 and a good indication that Games Workshop's sales may be stabilizing at pre-LOTR levels.

The percentage of Games Workshop products sold through independent retailers continued to decline in 2006, with the independent's share down 3% from 2005 levels to 42% worldwide.  Games Workshop's wholly-owned retail outlets increased their share of sales from 46% in 2005 to 48% in 2006 and direct Internet sales also increased from 9% to 10%.  Sales in North America mirror these percentages almost exactly, whereas the majority of Games Workshop's continental European sales, which suffered a major decline in 2005, are still handled by independent retailers in contrast to UK sales where the Games Workshop stores are responsible for a good two-thirds of all transactions.

Games Workshop opened two additional company-owned stores in the North American market bringing the total to 83.  According to the Games Workshop report, 'As our independent retailer base (in the U.S. and Canada) has continued to struggle, our focus has been on establishing and growing our own Games Workshop Hobby stores.'  The number of North American independent stores with active Games Workshop accounts declined form 875 to 729 during fiscal 2006.  Once again Games Workshop cited 'the continued reduction in our sales to independent and hobby retailers, notably in the U.S., where many smaller independent operators are ceasing to trade,' as a second factor in the decline of sales and profits in 2006.

In 2006 Games Workshop earned 1.2 million pounds in royalty income mostly from THQ Inc. for a Warhammer 40K computer game.  BL Publishing managed a 62% gain in sales from 1.3 million pounds in 2005 to 2.1 million pounds.  Games Workshop did not release a 2006 earnings figure for Sabertooth Games, but did acknowledge that its subsidiary 'has been struggling to break even since we acquired it in 2002,' while expressing hope for the prospects of Sabertooth's Universal Fighting System (which has been selling very well in U.S. hobby channels).