GameStop Corporation
(
GME
), a video game and entertainment software retailer, has undertaken
a series of initiatives to boost its top line. Recently, the
company announced its plans to extend its mobile electronics
business by providing trading services for a varied range of
Android tablets.
The company also announced that it was accepting pre-orders for
Google Inc
's (
GOOG
) Nexus 7 Tablet, which is slated to release in mid-July. The
product was recently showcased at Google's I/O developer
conference. The tablet features the latest Android OS system and is
priced at $249.
The consumers can place orders for the new tablet at GameStop's
stores in the U.S. The consumers placing orders will enjoy a 30%
trade bonus discount on all further purchases of video game
hardware, software and accessories along with iDevices and some
eligible Android tablets.
Management is banking on the increasing demand for Android
tablets and the ongoing multiscreen gaming trend to drive customer
traffic and thereby boost the company's top line going forward.
Of course, right through the recent economic downturn, GameStop
fared better than many of its peers because of its recommerce
business. GameStop holds a significant position in this used video
game products market. It has a good selection of used video games
for both current and previous generation platforms, which helped
drive sales.
Management believes that the company's recommerce initiative has
been gaining momentum and it has therefore taken steps to further
boost the business. For this purpose, it rolled out a model
offering instant cash or in-store credits in exchange for used
Android tablets of popular brands based on model, memory size and
physical condition. The company also started a recycling program,
which will help consumers to dispense with non-functioning or
impaired tablets.
We consider GameStop's recommerce initiative to be a smart move
given the slump in the video gaming industry, which has been taking
a toll on the top line. As a result, we believe that the company's
venture into the digital, iDevice and gaming tablet businesses
would be accretive to its results.
The video game industry is highly competitive, and video game
shoppers now have many alternatives to buy software, hardware and
game accessories for video game systems and personal computers.
Retail heavyweights such as
Wal-Mart Stores Inc.
(
WMT
),
Target Corp.
(
TGT
) and
Best Buy Co. Inc.
(
BBY
) have also entered the video game market. These larger retailers
could make a dent in GameStop's sales and margins.
GameStop carries a Zacks #3 Rank implying short-term Hold rating
for the next 1-3 months and correlates with our long-term Neutral
recommendation.
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