Leading games retailer GameStop has issued its second quarter fiscal report for the period ended July 31, revealing a sales increase of 3.4% to $1.80 billion and an earnings bump of 4.2% to $40.3 million. Comparable store sales also increased ever so slightly, rising 0.9%, which GameStop said was "primarily attributable to sell through of new hardware systems and new video game titles."
The retailer noted that "strong market share gains contributed to a 5.3% increase in new video game software sales."
The top games driving GameStop's bottom line were Rockstar Games' Red Dead Redemption, Nintendo'sSuper Mario Galaxy 2, THQ's UFC Undisputed 2010, StarCraft II: Wings of Liberty by Blizzard Entertainment and EA Sports' NCAA Football 11.
That said, digger deeper into the fiscal report shows that new game sales represented just 36.9% of total revenues. Used video game products accounted for 31.4% of sales, which was down year-over-year almost a full percentage point. Perhaps that will make Lou Castle smile. Used game products still represent the biggest profit for the retailer, though. GameStop saw a gross profit of $260 million in Q2 on used, while new game software accounted for $141.7 million in gross profit.
J. Paul Raines, Chief Executive Officer, said, "GameStop's second quarter results demonstrate the resiliency of our business model as we achieved both top-line and earnings growth despite the ongoing volatility in the global economy. Our U.S. operations were strong relative to the industry with solid comparable store sales and continued new video game market share gains. Internationally, we continue to focus on the execution of GameStop's buy-sell-trade model to improve operational efficiencies."
Dan DeMatteo, Executive Chairman, added, "Based on the outstanding initial results of our new customer loyalty program and selling downloadable content (DLC) in stores, we will accelerate and complete the national roll-out of both programs in the third quarter. Additionally, we purchased Kongregate, a leading social gaming destination, to advance our digital strategy. These investments are evaluated with a focus of increasing return on invested capital over a period of time. In addition, we are reviewing the use of excess cash to enhance shareholder returns."
The company also stated that it completed its $300 million share repurchase program, and so far in 2010 GameStop has opened 99 new stores: 48 in the U.S., 35 in Europe, 6 in Canada and 10 in Australia/New Zealand.
Finally, GameStop updated its guidance as well. Third quarter earnings per share guidance has been changed to range from $0.35 to $0.38 to "account for incremental expenses" related to the new PowerUp Rewards loyalty program and in-store DLC sales pilot, as well as for the "upfront expenses of the Kongregate acquisition and investments in e-commerce." Comparable store sales for the third quarter are forecast to range from +3.0% to +6.0%.
