Games Workshop has announced its year-end results for the fiscal year ending May 29, 2005, and reported sales and profit declines.  Worldwide sales were down 10% to 136.6 million pounds, and profits dropped 30% from 19.9 million pounds to 13.9 million pounds.  Management attributed the decline to the drop in sales of Lord of the Rings products.  'For the last two years we have been concerned that, for Games workshop, the Lord of the Rings business might create a bubble effect which might not be sustainable, but we have to confess that we underestimated the impact which this would have on our sales and profits in the last quarter of this financial year,' the report said.  But the company is continuing with its strategy and not focusing on cost cuts in the wake of the decline.  'We see this as a temporary reduction in sales for a business which has proven its growth credentials over many years, credentials we expect to re-establish,' the report said.  'We are therefore not taking short-term actions on our cost base which would prejudice our ability to grow in the long term.'


Sales in the U.S. and Canada dropped around the same percentage as sales worldwide, ending the year at 28.7 million pounds, down from 33.1 million pounds in 2004.  This translated to a 3 million pound drop, or around 9% in constant currency.  In the first half of this fiscal year, sales were up 27% (see 'Games Workshop Sales, Earnings Up'), so the drop in the second half was very large to bring the average down to that extent.  Profits in the Americas were up, however, to 365,000 pounds, up from an 829,000 pound loss in 2004. 


Sales in the U.S. and Canada continue to move from independent retailers to company stores.  Games Workshop opened another eight company stores in the second half of its fiscal year, for a total increase of 27 in the full year, a 50% growth rate in company stores.  The company now operates 81 stores in the U.S. and Canada.  Sales through this channel and its Internet and mail order operations were up for the year. 


At the same time, GW's sales to independent retailers were dropping.  The company reported that it was selling to 958 active accounts at the beginning of the year, and that number declined to 798 accounts by the end of May.  According to the report, 'This consolidation is in part due to us choosing no longer to work with uneconomic accounts, and in part due to some accounts going out of business.' 


Games Workshop also broke out sales from its newest divisions.  BL Publishing, its fiction arm, accounted for sales of 1.3 million pounds in the period, while Sabertooth Games, its U.S. CCG (and CMG) arm, had sales this year of $1.6 million.