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GameStop Q1 Net Income Drops 10.8%

26 May, 2016 By: Erik Gruenwedel

With the glow of next-generation Xbox One and PlayStation 4 consoles fading, GameStop May 26 reported a 29% drop in first-quarter (ended April 30) hardware sales to $312.9 million, from $439.7 million during the previous-year period. New software games declined 7.6% to $567.2 million, from $613.6 million.

GameStop saw Q1 profit decline nearly 11% to $65.8 million on revenue of $1.97 billion, compared with profit of $73.8 million from $2 billion a year ago. Same-store sales fell 6.2%, compared with an 8.6% increase during the previous-year period.

Filling the void somewhat was the collectibles segment (trends, posters, action figures, etc.), which saw sales 250% year-over-year, driven by the addition of ThinkGeek.com and assorted sales of "Five Nights at Freddy's" products, "Pokémon" trading cards and "Minecraft" toys. The company added two collectibles stores during the quarter, bringing the total global portfolio to 37 stores.

Specifically, collectibles generated $82.3 million in revenue, which represented 4.2% of total sales, compared with $22.8 million and 1.1% of sales a year ago.

"We exceeded our first-quarter … guidance in a challenging retail environment, due to the outperformance of our non-physical gaming businesses [technology brands, collectibles, digital],” CEO Paul Raines said in a statement.

Raines said contribution from non-gaming business units underscore the value of a diversification strategy, which delivered 42% of operating earnings.

“We expect these trends to continue in the second quarter as digital receipts continue to grow, technology brands store base continues to mature and collectibles sales continue to expand,” he said

Indeed, collectibles have become a mainstay at entertainment retail, including MovieStop stores in the southeast, f.y.e. (For Your Entertainment) stores nationwide, and Hastings Entertainment in the southwest.

About the Author: Erik Gruenwedel

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