GameStop Corporation
(
GME
) had little to cheer about its total sales figure for the
nine-week holiday period ended December 31, 2011, as sales merely
inched up to $3,019.1 million from $3,018.1 reported in 2010. New
video game software sales attempted to propel the company's sales,
but dismal sales across game consoles and hardware were the
deterrents.
The new video game software sales registered a growth of 9.9% to
$1469.2 million, reflecting robust sales of titles, such as
Activision's Call of Duty: Modern Warfare 3, Bethesda's Elder
Scrolls V: Skyrim and Ubisoft's Assassin's Creed: Revelations.
On other hand, new video game hardware sales suffered a decline
of 19.6% to $538.9 million due to the lack of launch of new console
products and insufficient price cuts, which could have stirred up
demand compared with 2010. This benefited retailers such as
Wal-Mart Stores Inc.
(
WMT
) who offered best deals in the hardware category.
Consumers these days are more tech savvy. Instead of buying
traditional game consoles, they prefer online games and spend more
time playing games on handheld devices such as tablets and iPhones.
Consequently, the market of traditional video game products has
suffered largely. In order to revamp the sale of video game
products, GameStop started concentrating on the sales of used games
to console users.
GameStop holds a significant position in the used video game
products market. The company provides a greater selection of used
video game products for both current and previous generation
platforms. The sales of used video game products, which accounted
approximately 21% of total sales, grew 3.5% to $627.9 million
during the holiday period.
The company indicated that comparable-store sales during holiday
period dropped 0.3%, reflecting a decline of 1.5% at its
international comps, partially offset by 0.3% growth witnessed in
the U.S. comps. However, GameStop posted sturdy digital sales,
which surged 60% buoyed by subscriptions for downloadable contents
such as "Call of Duty Elite".
The disappointing sales results prompted management to lower its
comparable-store sales guidance, and they now expect comps for both
the fourth quarter and fiscal 2011 to decline between 1% and 2%.
The company had earlier forecasted fiscal 2011 comparable-store
sales in the range of flat to down 1%.
However, GameStop continues to expect earnings between $1.66 to
$1.76 for the fourth quarter and in the range of $2.82 to $2.92 per
share for fiscal 2011. The current Zacks Consensus Estimates are
$1.72 for the quarter and $2.86 for the full year.
GameStop, which competes with
Best Buy Co. Inc.
(
BBY
) and
Amazon.com Inc.
(
AMZN
), also sustained its share repurchase activity during the holiday
period, buying back 2 million shares at $22.38 each, aggregating
$45.2 million. The company still has $329.8 million remaining at
its disposal under the share repurchase program. The company also
redeemed $125 million of its Senior Notes on December 16, thereby
making itself debt free as it entered 2012.
Closing Remark
GameStop continued to branch out and is transformed as a mixed
retailer of physical and digital gaming and electronics products.
The company's venture in digital, iDevice and gaming tablet
businesses would be accretive to its results. The company's
buy-sell-trade model of selling new games and buying back used
games and PowerUp Rewards program make it popular destination for
shopping.
Currently, we have a long-term 'Neutral' recommendation on the
stock. Moreover, GameStop holds a Zacks #3 Rank that translates
into a short-term 'Hold' rating, and correlates with our long-term
view.
AMAZON.COM INC (
AMZN
): Free Stock Analysis Report
BEST BUY (
BBY
): Free Stock Analysis Report
GAMESTOP CORP (
GME
): Free Stock Analysis Report
WAL-MART STORES (
WMT
): Free Stock Analysis Report
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