Thursday, November 20, 2008

GameStop Sales Climb to Almost $1.7 Billion, But Profit Dips in Q3

The tough economy and a tough comparison against Halo 3's launch led to a net earnings drop and slightly lowered guidance, but GameStop remains quite strong.

by James Brightman on Thursday, November 20, 2008

GameStop Sales Climb to Almost $1.7 Billion, But Profit Dips in Q3

Video game retailer GameStop announced its third quarter fiscal results for the period ended November 1. Despite a tough comparison with last year when Halo 3 launched, GameStop's sales rose 5.2 percent to $1.695 billion. Net earnings, however, dipped from $52 million to $46.7 million.

Comparable store sales were also down, falling 1.8 percent (as opposed to a 46 percent increase last Q3). That said, GameStop is optimistic: "Recent trends are encouraging as comparable store sales for October increased by nearly 11%, and increased 20.5% for the first two weeks of November, showing surprising strength given the unprecedented economic and financial crisis."

Sales of new video game software grew 10 percent for the quarter, driven by titles such as Madden NFL 2009, Star Wars: The Force Unleashed, Fable 2, Wii Fit, and Guitar Hero World Tour, which were the top five selling games.

"Despite the dramatic decline of the global economy and its severe impact on the entire retail industry, GameStop had a strong quarter," commented Daniel DeMatteo, Chief Executive Officer. "Sales have been very robust over the last several weeks, driven by strong new title releases such as Activision's Call of Duty: World at War and World of Warcraft: Wrath of the Lich King, and Microsoft's Gears of War 2. We believe that video games provide real entertainment value to consumers in these trying economic times and will be sought out gift purchases for the holiday season."

R. Richard Fontaine, Executive Chairman, added, "While we are operating through what has been the most unpredictable economic environment in my over 40 years in retail, the GameStop business model has proven to be very resilient. New game sales were strong due in part to the values generated by many of our customers trading in products while older products are being sold at value price points.

"I am pleased to say that during the quarter we negotiated the acquisition of Micromania, France's largest video game retailer. The final purchase price was reduced to approximately $636 million from the announced $700 million due to foreign exchange rate fluctuations and debt procured to fund the acquisition is projected to be paid off by the end of this fiscal year. We remain committed to using our strong cash flow to continue our global strategy for growth through future new store openings and acquisitions."

For the current fourth quarter, GameStop warned that sales and earnings will be "tempered slightly by the weakness in consumer spending." Earnings per share are expected to be in the range from $1.29 to $1.34, an increase of +13% to +18% over last year. Comparable store sales in the fourth quarter are expected to range from +4% to +5%. For the full year, GameStop is expecting earnings per share to range from $2.35 to $2.40, an increase of +30% to +33% over the prior year. Comparable store sales are projected to increase between +10% and +11% for the full year, and total sales are forecast to grow between +21% and +22%.

via GameDaily

Jason Kiwaluk

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Ideation | Ecommerce | Fintech | Innovation | Strategy | Opinionated Agitator RevenueWire,FuturePay+PayMotion

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