GameStop Q2 earnings double

Same-store sales lagged industry growth expectations

By Danny King -- Video Business, 8/21/2008

AUG. 21 | GameStop’s fiscal second-quarter earnings beat its forecast, as same-store sales jumped on record-setting titles such as Take-Two Interactive’s Grand Theft Auto IV. The shares fell this morning on investor concerns that the largest U.S. videogame retailer lost domestic market share and a deceleration in comparable-store sales.

Net income for the quarter ended Aug. 2 more than doubled to $57.2 million, or 34¢ a share, from $21.8 million, or 13¢ a year earlier, the company said today. Sales jumped 35% to $1.8 billion.

In May, the company forecast second-quarter earnings at as much as 28¢ a share.

GameStop is capitalizing on a videogames market that has surged as DVD sales have flattened and music sales have dropped. However, GameStop's sales growth failed to beat the 35% industry growth rate for hardware and software sales estimated by NPD Group for the first half of the year. GameStop’s same-store sales, which slowed from a 27% growth rate for the fiscal first quarter, lagged the NPD figure.

GameStop's shares fell as much as 6% this morning.

“We could not be more pleased with our results,” GameStop chief operating officer Daniel DeMatteo said on a conference call with analysts this morning.

With more than a quarter of GameStop’s stores in an overseas market where the release slate was slower, the company’s U.S. sales compare “much more favorably” to the NPD statistics, DeMatteo said.

The company was expected to earn 28¢ a share on sales of $1.7 billion. As a result of the second-quarter results, GameStop boosted its full-year earnings forecast to as much as $2.50 a share from as much as $2.39 in May.

Take-Two’s GTA IV set one-day and first-week all-time records for videogames after its April 29 release.