DOW JONES NEWSWIRES
GameStop Corp.'s (GME) fiscal fourth-quarter net income rose 22%
on strong sales, especially in used video games, as the video-game
retailer projected earnings for the current quarter above analysts'
views.
For the first quarter, it expects earnings of 40 cents to 42
cents a share and same-store sales to be flat to up 2%. Analysts
polled by Thomson Reuters expected earnings of 39 cents.
GameStop's shares were up 4.7% at $28.10 in premarket trading.
The stock is up 24% so far this year, widely outpacing the broader
market.
The video-game retailer had said in November results would be
solid but tempered by the deepening slump in consumer spending and
falling hardware prices. Shareholders have worried the slumping
economy will pinch sales of video games and consoles, especially as
competition from other retailers like Best Buy Co. (BBY) and
Wal-Mart Stores Inc. (WMT) is rising.
The company had a virtual monopoly in the used videogames
market, but is now facing competition from Amazon.com Inc. (AMZN),
which launched a service allowing customers to trade in used
videogames for store credit, taking aim at a key part of GameStop's
business. A big reason for GameStop's strong performance amid the
recession is its used-games business, which accounted for about 25%
of revenue and almost half of total gross profit in the first 10
months of 2008.
Since GameStop was spun off from Barnes & Noble Inc. (BKS)
in 2004, sales have been strong. But high prices for staples such
as gas and food and the recent stock market slump have made it more
difficult for people to shell out hundreds of dollars for game
equipment.
For the period ended Jan. 31, the company posted net income of
$232.3 million, or $1.39 a share, up from $189.8 million, or $1.14
a share, a year earlier. Last month, the company boosted its
earnings projection to a range of $1.33 to $1.34.
Last month, GameStop said revenue finished above its
already-raised estimates, rising 22% to $3.49 billion, as
same-store sales increased 9.6%.
Gross margin edged up to 24% from 23.9%. New-game sales jumped
22%. Margins rose to 5.4% from 5.2% for new hardware but fell to
46.4% from 48% for used games, with revenue up 11% and 28%,
respectively.
Looking ahead, the company affirmed last month's outlook for
earnings in the new fiscal year of 18% to 22% growth on sales
growth of 10% to 12%, above analysts' estimates at the time. It
said it expected the new year to be another record year.
The company also said last month it anticipates opening more
than 400 stores this year. It currently has 6,207 stores in 17
countries. Many retailers have been curtailing opening plans, or
shrinking, amid the slide in consumer spending.
GameStop said last month its $628.5 million acquisition of
Micromania in January enabled it to secure a growing foothold on
the European continent, where sales are seen reaching $2 billion in
2009.
The company said including Micromania, it opened or acquired
1,002 stores worldwide last year.
-By Kerry E. Grace, Dow Jones Newswires; 201-938-5089;
kerry.grace@dowjones.com
