DSi and Capcom help GameStop profits top $70m
Sales of used product grows over 30 per cent as new software sales decline in first quarter of year
US specialist retailer GameStop has recorded profits of USD 70.4 million for the first quarter ended May 2, up 13.4 per cent compared to the same period last year.
Total sales for the quarter grew 9.2 per cent to USD 1.98 billion, led by the successful launch of the Nintendo DSi handheld and two Capcom titles – Resident Evil 5 and Street Fighter IV.
However, the company blamed the recession in Europe and the slowdown of new console sales on a decline in comparable store sales of 1.5 per cent.
"During the quarter GameStop sustained its strong earnings growth momentum and exceeded earnings guidance despite less than planned comparable store sales," commented Daniel DeMatteo, CEO of GameStop.
"Although new videogame software sales declined by 2.8 per cent, lower-priced used products grew a robust 31.9 per cent, illustrating that value is becoming more important to our customers."
Of the USD 1.98 billion in sales, used videogame product sales accounted for 27.7 per cent, or USD 548.5 million, up from USD 415.7 for the same period in 2008.
In contrast, new software sales accounted for USD 770 million, compared to 792.8 million in 2008, while new hardware sales amounted to USD 395.9 million, up from the USD 339 million last year.
"We continue to profitably manage our business through the global recession by effectively managing our buy-sell-trade model and maintaining tight expense control. In fact, we were able to retire USD 50 million of senior notes and end the quarter with cash of USD 230 million. I am also pleased that we were able to capitalise on the downward pressure of rents, and open 114 new stores," commented DeMatteo.
"As in the past, we continue to improve operating margins, build brand and value awareness with consumers, and gain market share as we expand the videogame market worldwide," he added.
Looking forward, DeMatteo said that the "brittle" economy is a concern in the second quarter, but the company expects autumn and winter sales to to be much stronger than the first half of the year.
"In the second quarter, like the first, we face very strong comparisons to the prior year period due to the unprecedented number of blockbuster titles released in the first half of 2008 and a significantly more brittle global economy.
"We do expect the back half of this year to be stronger than the first half due to a full and wide-ranging new title lineup. All together, this places us in a prime position to capitalise on the growth in the market in the fall and holiday seasons."