GameStop To Continue Its Expansion (GME, WMT)
Symbols: GME
Rumors are abounding in the market regarding the potential takeover of videogame vendor GameStop Inc. (NYSE: GME). The company recently reported reasonably good earnings numbers and its balance sheet looks robust. The vendor is generating $400 million annually in free cash flow. However, the company has felt the pinch from Wal-Mart’s price cutting tactics. Wal-Mart recently slashed prices of some games.
GameStop has a niche market in the refurbished-game segment. Used-games sales constituted 25% of its total revenue in 2009. The gaming outfit has a healthy margin of 50% on used-games in comparison to 20% for new game sales. Further, GameStop has virtually no competition in this segment. GameStop is planning to open 400 new stores this year.
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