(Discussion) GW Half-Yearly Financial Report, Space Marine II launch, pricing update flags

[DemonGSides]

2 hours ago, Valkyrion said:

I don't want to derail the topic with non-forum posts, but is AoS popular? Obviously it's not as popular as 40k, but is it as popular as Heresy or the skirmish games, or even other manufacturers games? In a league table of table top wargames, does AoS come above the Star Wars games, for instance? 

 

Locally AoS seems decently interested in, whereas every other game you mention is basically non existent; the Star wars and the Marvel games both have routine game days, but they aren't very populated. 

[Norman Paperman]

Anecdotally, AoS seems very popular at my LGS and it has a pretty thriving community on Reddit. I actually buy more AoS than I do 40k, but I don't play either. 

 

However, despite AoS seeming to sell pretty well in my anecdotal experience, Skaventide is still stacked to the rafters at said LGS. I think they have a real problem in that Stormcasts just aren't as popular or versatile as Space Marines are to drive sales of a $300 box. If they were expecting it to sell like Leviathan, they would have had a hard time because all of the SM chapter players are more likely to buy it, while AoS players are spread out over all the factions. I love AoS, but I'm not really interested in either of Skaven or SCE, so I won't buy it unless it goes on a deep, deep discount. Having thousands of Skaventide boxes sitting around would contribute greatly to that markdown of unsold inventory. 

 

I doubt they produce much LotR stuff at all, but idk who would actually buy any of that new War of the Rohirrim stuff. And while I'm sure Old World is far more popular than LotR minis, they have produced a looooooooooot of OW stuff that might not be moving. To spread the anecdote a bit further, and I think this is a little bit more relevant than just my LGS, it seems that the youtube minipainters all enjoy AoS and 40k, but don't do any HH or OW, and that's probably the best indicator of what the community is actually interested in. 

 

TL:DR - I'm guessing that AoS is doing fine but Skaventide sold badly. 

[Dark Shepherd]

New website is one year old for reports and websales are down over 4% despite in-store being up 11 and trade 21. Wishlists badly need to come back on thewebstore for example. If profits are up one third but web sales are falling then it should be Last Wall Protocol for the IT department. That said there's a good chance the surge in trade sales is in part due to peeps buying cheaper\better competitor paints

Edited January 15 by Dark Shepherd

[Grotsmasha]

* PLEASE KEEP TO THE TOPIC OF THE REPORT, AND NOT AOS *

[Dark Shepherd]

FWIW shares in GW are down about 5 or 6% on the back of this but are still rated as a buy

[Mechanicus Tech-Support]

Buy on the rumor and sell on the news

[The Praetorian of Inwit]

When Labours tax increases take effect from April it will hit GW. The price rise will happen and it will be rough. 

[Domhnall]

1 hour ago, The Praetorian of Inwit said:

When Labours tax increases take effect from April it will hit GW. The price rise will happen and it will be rough. 

 

It depends, as apparently they already pay the living wage, but the National Insuarance rise could affect prices, as well as third party costs. How much the prices rise (as they do) we will need to wait and see. 

This article popped up on my phone feed which covers some of it:

https://www.cityam.com/games-workshop-warhammer-makers-stock-dips-amid-cost-pressures/

 

Extract from the page:

However, rising costs from employer national insurance hikes and a rising minimum wage introduced in last October’s Budget have left investors worried that cost pressures may begin to impact the company.

While the company said it didn’t expect policies introduced in the Budget to have a material impact on its financial performance this year, as it already pays employees the living wage; it may drive “third part cost increases” over the next year.

“At this stage we have not been informed of any significant changes,” Games Workshop said.

“We await confirmation on any other external tariffs or tax changes and we will manage them accordingly.”

[N1SB]

+++ STOCK MARKET (is actually reacting rationally) +++

 

 

This is so perfect, I HAVE to start with it, great job keeping an eye on this Brother Shepherd:

 

21 hours ago, Dark Shepherd said:

FWIW shares in GW are down about 5 or 6% on the back of this but are still rated as a buy

 

Here's a case of where 2 things can be true at the same time:

 

• GW is performing better than ever
• GW's stock went down slightly

 

Here's the stock chart, the key points is to note when the spike and the drop-off happened:

 

 

Remember, remember, 22 November.  What corresponds with it?  Here's GW's RNS feed, check that date:

 

https://investor.games-workshop.com/category/rns

 

It's that Trading Update where GW previewed the jump in Licensing Revenue, which is ALL Profit.

 

So GW's stock rose, the stock market is all about profit maximisation, etc.  So why the drop?  Here's why:

 

 

So the way to read this is you have all this stuff NOW vs. LAST YEAR.  Everything is growing...except the literal bottom line.

 

Dividends per share declared and paid in the period.  GW has been performing better, but paying less than before.

 

I had a theory, but I'm going in blind to test it.  I'll do the live calculation in front of you.  How much of GW's Earnings per share, that's all the profit for each GW stock, are they actually giving to shareholders as Dividends?  We have the Earnings per share right there, so I'll look at January last year vs. January this year.

 

 

+++ Testing Begins +++

 

 

January 9, 2024: GW paid 120p from when Earnings per share were 216.9p.  120p ÷ 216.9p = 55.3%

 

January 14, 2024: GW paid 155p from when Earnings per share are 288.9p.  155p ÷ 288.9p = 53.7%

 

As suspected, bottom line (literally, as the last line in the financial highlights): GW is performing better (than ever), but paying out less.

 

 

+++ Testing Ends +++

 

Conclusion: GW told investors it was performing better than ever, but aren't paying them back at the same rate, thus a stock market correction.

 

(Btw, GW's stock also went down the day the Amazon deal was announced, oddly.  Also, Amazon has NEVER paid dividends.  Isn't that crazy?)

Edited January 16 by N1SB

[N1SB]

+++ GOOD MEDIA COVERAGE ON GW +++

 

 

I don't merely mean the media's coverage on GW is positive, but that it's high quality journalism:

 

14 hours ago, Domhnall said:

This article popped up on my phone feed which covers some of it:

https://www.cityam.com/games-workshop-warhammer-makers-stock-dips-amid-cost-pressures/

 

This City AM article has been the best, shortest & sweetest take of GW from any media I've seen, INCLUDING the analysts that were interviewed.  It's clear those guys were trained as I was by similarly harsh senseis in the financial dojo that is The City.  Look at how they talk about GW.

 

CORE business, but Licensing was the star, why?  Space Marine II, they actually mentioned it, while acknowledging it as a one-off.

 

Then they mention the factory, yet not Amazon, why?  Because GW's business is The Hobby, not Hollywood.  This is a good paper!

 

We're like 2 Techpriests sparring, matching moves, then realising we're so alike, "whoa...did you train under my sensei?  We're dojo brothers!"

 

The only difference I think between City AM and me is they still anthropomorphosise business decisions...but it's such a moot difference (and newspapers have to write stories, with characters, names sell).  In Warhammer terms, if a unit gets a points nerf, City AM would say GW is responding to tournament players using it too much, whereas I'd just say it was clearly OP.  Same difference.

 

Brilliant, brilliant paper, this City AM.  Brother Domhnall, thanks for showing me good business journalism still exists.

Edited January 16 by N1SB

[N1SB]

+++ HUMILITY +++

 

 

I watched some YouTube Short of some movie or music awards, where the host roughly warned all the potential winners:

 

"Thank your colleagues, thank the fans, then leave!  No one wants to hear your political views!"

 

I thought of that because the previous long-time GW CEO would ramble/rant wax poetic, but the current CEO said this:

 

 

He literally thanked his colleagues and the fans.  This was the time to show off.  Best half-year results, Space Marine II, Amazon deal.

 

I'm reminded of an editor at the Washington Post, when they broke the (in)famous Watergate story, walked around the pen repeating:

 

"Don't gloat.  Don't gloat.  Don't gloat.  Don't gloat.  Don't gloat.  Don't gloat."  I thought of it when I read the CEO's comments here.

 

 

It sounds obvious, but imagine if GW was a U.S. company, the CEO would already be on every cable news show, gloating about it.

 

All this is especially relevant, amidst all this hype, because we were just talking about what caused GW's worst year in 2007:

 

 

TL;DR - it was not even arrogance, but perhaps a reliance, on The Lord of the Rings that lead to GW's worst year in 2007, then a decade of decline.

 

The current CEO was working his way up, including in Licensing, and was made CFO in 2008, right after that year.  I'm almost certain he had the unpleasant task of deciding how many people to lay off, like a repentant Commissar.  It's a bit of a coincidence, but when he talks about humility, it's prolly not just corporate jargon.

 

Because Sauron's greatest sin, which was also his greatest weakness, wasn't that he was evil.  It was his hubris.

Edited January 16 by N1SB

[LameBeard]

@N1SB thanks as ever but I feel something does not compute above.

 

You show dividends per share decreasing in the period, but City AM quote “Games Workshop’s strong financial performance was joined by a “chunky” dividend announcement, taking dividends to £4.20 per share, up from the £3.15 declared at the same stage last year”

 

So I don’t think those numbers explain the drop in share price, which would be more forward-looking. The dividends before Dec are not “new news”. The explanation would have to be it wasn’t as chunky as market hoped/expected.

 

My takeaway: don’t try to second guess the stock market guys - it will always do random stuff.

 

My prior: CityAM was not that great when I used to read it in the City. You needed to start near the back for 3 good articles in this vein on individual companies and ignore the very monotone, un-nuanced political commentary in first half of the paper. 

[N1SB]

+++ AVAILABILITY KPIs +++

 

 

I was kinda weirded out that none of the Kill Teams seem to sell out.  It was popular here, so I expected [Temporarily Out of Stock].

 

On 1/14/2025 at 9:19 PM, skylerboodie said:

Yeah the report notes -

 

"We had a successful launch of the new edition of Age of Sigmar and the launch of the new edition of Warhammer 40,000: Kill Team continued our momentum"

 

but also -

 

"We are still not meeting our stock availability KPIs and not all of our new product releases sold to our planned levels, so our write downs of the stock in our warehouses were c. £3.6 million higher than the same period last year. This is all well within our control so we will continue to fine tune the details to find some improvements." (emphasis added)

 

Not sure if there were any other releases that particularly undersold.

 

Good catch, you're right about products underselling.  However, overselling is also a problem.

 

Overselling is when you don't have stock, you're leaving money on the table AND customers in a lurch.

 

But it's not just customers in a lurch, it's partners that serve them in a bind...like Friendly Local Gaming Stores.

 

Recently, I've been hearing FLGS are abandoning GW because their representatives aren't getting back to them.

 

I shared their concern that GW was favouring their own Warhammer Stores over their FLGS, like favouritism.

 

Thankfully, apparently that's not the case:

 

 

The fact that Revenue grew twice as much in Trade (i.e. FLGS) than Retail (i.e. Warhammer Stores) means FLGS got more stock; they can't sell stock they don't have.  Online decreased because ALMOST EVERYTHING is [Temporarily Out of Stock] on the website.

 

So yes, this DOES suggest GW IS playing favourites, but GW favours FLGSs.  They give what they got to FLGSs!

 

In case you're wondering there's statistical games, like the percentages are big for Trade because their base number is so low, that's also NOT the case.  Trade is historically around 2.5x what Retail is, about two-and-a-half times more Revenue from FLGSs than Warhammer Stores:

 

 

Where Warhammer Stores have an advantage over FLGSs is I know Warhammer Store managers horse-trade with each other.  Like our store in Hong Kong is 40k-centric, but one in Mainland China focuses on AoS.  Our redshirt and the Mainland one would courier 40k stuff for AoS ones constantly.  It's to the point where we're in the middle of a conversation about recent lore, he looks through the store's glass doors and sees the delivery guy, he's already picking up an AoS package to hand him while receiving a 40k one.  I don't know if FLGSs have these agreements with one another; they might be prohibited from doing so by GW itself.

 

However, 2 things can be true at the same time: GW favours FLGSs more than their own, AND it's STILL NOT enough stock.

 

That's down to supply issues, why I keep on talking about Factory Four, as GW does throughout the report.

 

The terminology of "availability KPI" is very interesting.  KPI is corporate jargon, Key Performance Indicators.

 

What does that even mean?  KPI is like Secondary Objectives in 40k.  Revenue and Profit are Primary Objectives, but KPI as Secondary Objectives means it's something systematised that GW absolutely wants to do, like GW employees want to make sure FLGSs have stock available, and it's not just about the money, but a mission in itself.

 

GW does acknowledge they're failing this availability KPI, but the fact they even have this metric in place is a good sign.

 

 

+++ WRITE DOWNS +++

 

 

Brother Skylerboodie focused on the important bits.  There is 1 piece of trivia from that same passage that got me curious:

 

 

You ever read some 40k rule and thought "I know what all those words mean, but I have no idea what GW's saying?"

 

Like you have to turn the page and look for some example with a diagram on what that 40k rule means.  That's write downs.

 

Write down is when a product goes down in value, but it's still completely fine and sellable, just at a reduced price.

 

I'll give a Techpriest example: processors, like CPUs or GPUs.  You know how a top-end nVidia graphics card is REALLY EXPENSIVE...until it releases an even newer one?  Then that same nVidia graphics card suddenly drops in price because it's no longer the top-end one.  That's a write down (and when I usually buy).

 

But GW NEVER lowers the prices of its miniatures!  Even old stuff gets a price hike, GW just calls it Made To Order.

 

While describing this, I did think of 1 possibility, it's when GW takes old sprues and stuffs them in Imperium magazines or Combat Patrol magazines.  I got the Imperium magazine with 3 Necron Warriors and a pot of paint, this really would be the equivalent of an nVidia GPU dropping in price, isn't it?  Mystery solved.

 

UPDATE - Thanks to Brothers Sky Potato and Zero Wolf for correcting me.  I checked my own copies of the 9th ed Recruit Edition with Space Marines vs. Necrons AND my copy of Imperium magazine with Necrons.  Same models, but clearly different sprues.  Only had the single barreled guns.

Mystery is NOT solved, case is re-opened, not sure what a GW write-down could be now.  Could be those discounts our Brothers mentioned.

Edited January 19 by N1SB

[LameBeard]

The only time I remember them dropping price is the sale to shift ‘Dominion’. This could be a sign Skaventide is piled high in the warehouse and is being marked down in anticipation of a sale next year. But yes, I was equally mystified because that’s the only thing I can think of on write-downs. Magazine idea is interesting, but that needs quite a lot of planning.

[Firedrake Cordova]

22 minutes ago, N1SB said:

While describing this, I did think of 1 possibility, it's when GW takes old sprues and stuffs them in Imperium magazines or Combat Patrol magazines.

Amusingly, that's probably the most obvious reason,and one my brain didn't go to.  My initial reaction was to wonder if they were saying "anything that doesn't sell within x weeks gets charged 'rent' of warehouse space due to not being able to put something where stock-that-should-have-been-sold-but-hasn't is sat", but that might be a bit too-OTT-accountancy.  

 

++EDIT: The only time I remember GW dropping prices was in the 1990's,, when they sold off old Codex/Army books off super-cheap, and did 3-for-2 on blister packs in a bargain bin ... ahh, nostalgia!

Edited January 16 by Firedrake Cordova

[N1SB]

+++ PRICING UPDATE? +++

 

 

I Want Brother Joe To Be Right Edition.

 

On 1/14/2025 at 6:46 PM, Joe said:

(Downside to being at work is it's literal glances in during free moments. )

I think it's within reason that they could avoid a price rise this year by doing the aforementioned janky math - as they've mentioned wanting to stop them where possible for a while now, however I'm not certain it'd play out that way. If the US tariffs go ahead they'll need to put prices regardless.

 

 

If Brother Joe is right, GW doesn't raise prices, we all benefit.  If I'm right, GW does raise prices, we all suffer, including me.

 

<picture of UFO> I WANT TO BELIEVE, btw it's not just you that skimmed the report, I didn't realise GW did the maths for us:

 

 

There's the 67.5%, they even broke it down, srsly GW's made me obsolete.  It's such a great breakdown.

 

A reminder that GW aims for 70%.  +'s here are increased GW profits or savings, so they don't pass costs to us.

 

I am a little bit confused by what they include and exclude, and that gives credence to Brother Joe's hope.  What gross margin is supposed to represent is the cost of doing business for each unit of what they make, the miniatures.  So raw "Materials" makes sense, like you need to buy plastic to make minis.  "Design" actually does not, because you already have the mold, you only care about the plastic you're pouring into it.  And animation for Warhammer+ doesn't really make sense to me.

 

Utilities...like the all important energy costs to melt the plastic for minis, is also usually here, but it's not.

 

So considering how janky GW maths already is...maybe Brother Joe is right, and there's 1 more glimmer of hope:

 

 

Tbh, gross margin is just a financial ratio, it's like saying a weapon will kill so many MEQ, a shorthand that's not required in game rules.  A number closer to reality is manufacturing costs as a percent of revenue (a useful figure most financial analysts don't look at tbh, because MBA maths is pretty silly).

 

Thus, while manufacturing costs have gone UP, because GW was selling so much, as a percentage of core revenue costs went DOWN.

 

This is really an argument on how GW treats a financial ratio vs. a real number.  Note we're not even inserting Licensing revenue anywhere here, because I do think that'd be irresponsible for GW to mix those things.  And even without it, I think there is an argument in Brother Joe's favour to avoid a pricing update.

 

(I also studied Microsoft and their Xbox division...they also have a 70% gross profit margin, btw.  As part of Xbox's gross profit margin, they do include Xbox Network/Live, their gaming service.  They used to sell consoles at a loss to sell you Xbox Network/Live subscriptions after.  But Licensed game revenues are NOT in there, either.)

[LameBeard]

@Firedrake Cordova I should have said “recently”. I remember the great lead sale at the end of the 90s when they switched the metal formula. I bought some Ork Freebooterz. That must have been a write down.

[Firedrake Cordova]

My addition wasn't a criticism directed at you, @LameBeard - your post just sparked a pang of nostalgia and I thought it worth sharing  

[N1SB]

+++ VIDEO GAMES +++

 

Let's talk video games for a bit (I mentioned Xbox earlier for a reason).

 

So you buy a AAA title, like a big game, for US$60, standard price.  You know where that $60 goes?

 

• $10 goes to the retailer, like Game Stop
• $10 is a licensing fee to the console maker, like Microsoft, for the Xbox
• ROUGHLY $10 goes to the marketing budget, if their forecasts are right
• $10 (only) goes to the actual developer...it's so unfair, isn't it?
• The remaining $20 goes to the publisher as profit

 

This is pretty standard across the industry, so when you PC master race gamers see a title go for half-price on Steam, that's because they don't have spend half the price on a retailer (it's online), a licensing fee to the console maker (Microsoft charges for the Xbox, but NOT on Windows), and the advertising's already been spent.

 

What I don't know is from which of those buckets GW's licensing revenue comes from.  Let's see how much that is:

 

 

I hadn't noticed GW's dividing Licensing revenue between Guarantee (money up front) vs. Earned (royalties per unit sold) before.

 

It makes perfect sense.  When I was an itty bitty Techpriest in a video game company (this was when I was a web dev for a browser-based game), I remember everyone licensed the Quake engine.  iD software charged a fee up front AND a percentage, while providing tech support to help you design with their engine.

 

 

+++ I'm just scribbling back-of-napkin maths +++

 

 

I'll just deal with this earned income of £26.1 million, a jump from £5.9 million.  Let's assume/treat £20 million from Space Marine II.

 

Around November, the same time period covered in this report, Space Marine II sold 5 million copies.  So it's like £4, under $5, per copy.

 

So off a $60 licensed game, GW managed to get some upfront Guarantee, some Earned royalties, let's round it out, let's just say $5.

 

It's really, really not bad.  And I'm thinking hoping it's from the marketing budget.  People think of only advertising, but marketing is about going to the market.  By getting the Warhammer 40,000 license, you're buying into the market of 40k fans, something that GW has long been advertising to.  That's how I'd cost-justify.

 

Btw, 5 million units sold is quite a respectable number.  Iirc any of the Halo games on the Xbox sold around 5 million; it's almost an auto-buy, but they were Xbox exclusives.  To compare with other games, Street Fighter 6 has only about 4 million copies sold around this same time frame.  So Space Marine II did well.

 

And GW did really, really, really well off someone else's game.  $5 per unit on a title you didn't even make.  Humility from earlier is right.

[N1SB]

2 hours ago, LameBeard said:

@N1SB thanks as ever but I feel something does not compute above.

 

You show dividends per share decreasing in the period, but City AM quote “Games Workshop’s strong financial performance was joined by a “chunky” dividend announcement, taking dividends to £4.20 per share, up from the £3.15 declared at the same stage last year”

 

So I don’t think those numbers explain the drop in share price, which would be more forward-looking. The dividends before Dec are not “new news”. The explanation would have to be it wasn’t as chunky as market hoped/expected.

 

My takeaway: don’t try to second guess the stock market guys - it will always do random stuff.

 

My prior: CityAM was not that great when I used to read it in the City. You needed to start near the back for 3 good articles in this vein on individual companies and ignore the very monotone, un-nuanced political commentary in first half of the paper. 

 

You're right, it's like trying to anticipate what a madman will pick for breakfast.

 

I think it comes down to how trading algorithms treat Snapshots vs. Cumulative Data.  Even in an age of AI, the trading AI is very snapshot-centric.  Your approach is the one I think makes more sense, you look at the overall year...and sadly not the one Wall Street's Skynet uses (because it'd make too much sense for it).

 

On 1/15/2025 at 11:04 AM, Grotsmasha said:

* PLEASE KEEP TO THE TOPIC OF THE REPORT, AND NOT AOS *

 

You're right, Brother Grotsmasha, but that's on me.  Our Brothers was just trying to help me with a thing.

 

Prior to this, I mentioned AoS, to separate it out from new Brothers and Sororitas coming into the Warhammer Store for the 1st time due to Space Marine II.  I actually got a pretty good idea of how to treat it, listening to them.  Even the CEO mentions this without directly attributing it:

 

 

But it turns out, I won't be able to kinda guess that number, because I forgot new Kill Team came out.  Too much overlap.  If it was just AoS and a Codex release, I could do some back-of-napkins maths to guess, and turns out we're usually right.  But another 40k game?  Too fuzzy.

 

Please continue the discussion, all, I've already talked too much for now, so I'll lurk for a bit.  I might play Speed Freeks for a bit.

Edited January 16 by N1SB

[alfred_the_great]

As ever, thank you @N1SB

[Dark Shepherd]

Lotta talk about costs going up but the economics channels I follow are saying the price of oil is expected to go way down in 2025 which saves GW a lot on the cost of making miniatures

 

Its 2 years off but their cardboard factory beside HQ should deliver a lot of savings

[LameBeard]

2 hours ago, Firedrake Cordova said:

My addition wasn't a criticism directed at you, @LameBeard - your post just sparked a pang of nostalgia and I thought it worth sharing  

That’s how I took it - I hope you didn’t think I was being defensive - I wanted to join in the nostalgia sharing. Imagine telling the young people that we remember a time GW dropped prices - they would never believe us!

[Firedrake Cordova]

17 minutes ago, LameBeard said:

That’s how I took it - I hope you didn’t think I was being defensive

To be honest, I misread the tone  

[LameBeard]

15 minutes ago, Firedrake Cordova said:

To be honest, I misread the tone  

Sorry, it’s my fault being lazy while writing on the phone, it can come across a bit terse.

 

Back on topic I’m still suspicious that web sales down so much is a result of “temporarily not available” rather than “it’s an awful website”. I might try to do some digging about whether they’ve written off any investment there - that’s where the humility should be shown in my view!