GameStop's Q4 profit rises 22%
Retailer downplays Amazon's entry into used games
By Danny King -- Video Business, 3/26/2009
MARCH 26 | GameStop's fiscal fourth-quarter profit beat its February estimate, as the largest U.S. videogames retailer boosted same-store sales on a jump in videogame software and used games revenue.
The company, which today downplayed the possible effect Amazon.com's entry into the used-game sales market will have on GameStop's business, also forecasted current year earnings that will meet analyst expectations.
Net income for the quarter ended Jan. 31 increased 22% to $232.3 million, or $1.39 a share, from $189.8 million, or $1.14, a year earlier, as sales rose 22% to $3.49 billion, GameStop said in a statement today. The company, whose fourth-quarter same-store sales rose 9.6%, was expected to have revenue of $3.46 billion, the average estimate in a Thomson Reuters survey, while the company last month estimated earnings of about $1.34 a share.
GameStop said it gained market share in a videogame industry that has surged as demand for other forms of packaged media, such as DVDs and CDs, has fallen. U.S. spending on videogame hardware and software last year rose 17% from 2007 to about $22 billion, the Entertainment Software Assn. said in a January statement.
"In spite of the recession, videogames are viewed as relatively cheap entertainment," GameStop CEO Daniel DeMatteo said in a conference call today. "Without the recession, games probably would have grown more this year."
Used-game sales accounted for 23% of GameStop's fourth-quarter sales and 46% of its gross profit.
Amazon earlier this month started testing its Video Games Trade-In service, in which customers ship the retailer their used games in exchange for credit on a gift card that can be used toward any item on Amazon’s Web site.
"The online trade model was tested by us and we saw very little consumer acceptance. We do not believe this will work," DeMatteo said. "I'm not impressed by their pricing," he added later in the call. "They seem to be following us."
For the year, GameStop's profit jumped 38% to $398.3 million, or $2.38 a share, from $288.3 million, or $1.75, a year earlier, as revenue rose 24% to $8.81 billion. For the current fiscal year, GameStop forecast earnings of between $2.81 and $2.90 a share. Analysts in a Thomson Reuters poll estimated profit of $2.85 a share.
In January, GameStop said its same-store holiday revenue jumped more than 10% as the combination of new software releases and demand for such hardware platforms as the Nintendo Wii caused videogame sales to defy slumping retail demand during the holidays.
