GameStop Sees Record Q1 Profits, Plans For Decline
Console sales are slowing and new software sales are down 2.8 percent -- but with used software sales up 31.9 percent, major specialty retailer GameStop is seeing sales up.
The company's profits were up 13.4 percent to $70.4 million in its first fiscal quarter ending May 2, and total sales were up 9.2 percent to $1.98 billion.
Sales were led by a "very successful" launch of the Nintendo DSi handheld system and strong releases of Capcom’s Resident Evil 5 and Street Fighter IV.
It's not all good news, however. Comparable store sales didn't make expectations -- they declined 1.5 percent "due primarily to sharper recessionary effects in Europe and a slowdown of new console sales that occurred late in the quarter.".
Like recent NPD declines have shown, year-over-year growth comparisons to the launches of Grand Theft Auto IV and Super Smash Bros. are challenging the industry, and GameStop is not immune.
For the current quarter, the company predicts comparable store sales to decline by 8 to 11 percent thanks to the challenging comparison and the continuing decline of new hardware sales.
Despite the retailer's "record" Q1 profits, the Street responded, tumbling the company's shares 12 percent in early trading.
"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," says GameStop CEO Dan DeMatteo.
"Although new video game software sales declined by 2.8 percent, lower-priced used products grew a robust 31.9 percent, illustrating that value is becoming more important to our customers."