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GameStop Eyes Stake in Trend Business

28 May, 2015 By: Erik Gruenwedel

GameStop is rolling out in-store selections of collectibles and trend items, CEO Paul Raines said on the retailer’s May 28 first-quarter (ended May 2) fiscal call.

Trend, or “loot,” as Raines called it, has become a growing market segment among entertainment retailers, including Hastings Entertainment, Trans World Entertainment’s f.y.e. stores and MovieStop. Notably, chains are focusing on action figures based on movies, books, comics and video games. In North America, the entertainment collectible and licensed merchandising category is about $11 billion annually.

Trend brands include Avengers: Age of Ultron, Pixels, The Hunger Games and the upcoming Star Wars: Episode VII — The Force Awakens, which Raines said is experiencing very strong preorders.

“We have learned a great deal about this fast-growing, popular consumer segment from our Australian colleagues, who have been piloting the business model for two years,” Raines said, adding that the business is projected to grow to $500 million in incremental revenue within three years.

On a combined basis, GameStop sold 46% of all Xbox One and PS4 combined hardware and software sales during the quarter, up 6.1% from a year ago. The month of April was even more impressive as GameStop captured 47.6% of all software sold.

“We sold 57% of all Xbox One and PS4 software during the month and nearly half of all the new-gen hardware and software combined,” COO Tony Bartel said on the call.

Meanwhile, GameStop continues to open technology-centric stores featuring branded retail partners such Apple, AT&T and Cricket, ending the quarter with 549 stores — double the tally during the previous-year period.

The tech stores are a combination of shuttered Radio Shack conversions, GameStop conversions, and white space stores.

“We are the most productive dealer in the AT&T network and we remain in the top tier of all Apple authorized resellers,” Bartel said.

Finally, same-store sales in the U.S. increased 9.1%. Sales in the mobile and consumer electronics category rose 33.9% to $136.8 million. Technology brands revenue increased 70% to $102.2 million, driven by the addition of 65 new stores during the quarter. As a result of these openings, GameStop’s Spring Mobile is now AT&T’s second-largest authorized reseller in the U.S.

Indeed, new video game hardware revenue increased 21% to $439.7 million; new software sales increased 29.8% to $613.6 million. Previously-owned game sales increased 28.3% to $582.4 million.

Net income increased 8.5% to $73 million.

“Our first-quarter results exceeded expectations,” Raines said.

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