Market Overview

Highlights from GameStop's Q3 Earnings Conference Call

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Below are some highlights from GameStop's (NYSE: GME) third-quarter earnings conference call:

  • Consolidated global gross margins for the quarter were 28.4% compared to 31.4% in the third quarter of last year with the primary reason for the decline being the shift in mix into new software.
  • Inventory was up 4.3% as Gamestop headed into the fourth quarter of launched new titles.
  • For the second quarter in a row, Gamestop is forecasting positive same-store sales, ranging from plus 2% to plus 9%.
  • The launches of the PS4 and Xbox One are coming at Gamestop's highest U.S. market share ever for software; they sold 52% of all 360 and PS3 software titles during the quarter.
  • During the third quarter, Gamestop attached software at a rate that is 2.2 times greater than that of the competition.
  • Gamestop has sold through all of their PS4 reservations and the additional allocation from Sony.
  • Their share of the total units sold was higher than on any previous console launch, and their sell-through since launch was 80% higher than the total amount of PS3s that we sold in our 2006 fiscal year.
  • Running the same plan with the Xbox One launch with the value of their reservations and additional allocation 15% higher than the amount of Xbox 360s that they sold during their entire 2005 fiscal year.
  • Gamestop also commented on their competitors expectations of significant price discounting this holiday: Gamestop is confident that this(expectation) will have a minimal impact on their business because of the following reasons.
    1. First, Gamestop believes that demand for the new consoles will outstrip supply for months to come, so they do not expect price discounting on the new platforms.
    2. Second, Gamestop has intentionally increased their market share and related PowerUp Reward members to peak levels, so they are better able to communicate their unique knowledge and value proposition and secure more allocated product.
    3. And finally, Gamestop has unique trade promotions against the new consoles and new games, making them the most affordable and profitable retailer to sell the new consoles.
  • This quarter was the most profitable third quarter for the International business in Gamestop's history.
  • A significant increase in new release reservations was a key driver of third quarter sales, which were secured through the combination of exclusive content, unique collector's editions and the value of Gamestop's buy-sell trade model.
  • During the third quarter, trade-ins increased 19% versus 2012 as customers took advantage of the opportunity to trade up to the next generation of upcoming new consoles.
  • GameStop websites continued to grow, which, according to comScore, rank in the top 20 retail websites in terms of total traffic, and are seeing double-digit traffic growth year-over-year.

Posted-In: Earnings News

 

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