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New game consoles fuel GameStop’s profit in first quarter

Despite posting increases in the last few quarters, GameStop was seeing shares drop because its numbers were falling short of analysts’ expectations. But thanks to growth in its mobile business and demand for new game consoles, the company started the year with better-than-expected profit that drove shares to rise 5%.

Total global sales for the quarter were $2 billion, a 7% increase compared to $1.87 billion in the prior year quarter. Consolidated comparable store sales increased 5.8%. Sales were driven primarily by continued strong worldwide consumer demand for Microsoft’s Xbox One and Sony’s PlayStation 4, as the new hardware category surged 81.1% compared to the prior year quarter. From launch through April, total market sales in the U.S. of PlayStation 4 and Xbox One hardware have more than doubled the combined sales of PlayStation 3 and Xbox 360 hardware through their first six months of sales.

During the quarter, new software sales dropped 20.4%, due to fewer AAA titles being launched this year compared to the first quarter of 2013. In spite of the decline in new software, pre-owned/value software improved 5.3% year-over-year as ongoing trade-ins toward new consoles improved inventory levels and subsequent sales growth. The mobile and consumer electronics category, which now includes Technology Brands results, soared more than 100%, primarily driven by the contributions of Spring Mobile and Simply Mac.

GameStop’s net earnings for the first quarter were $68 million, a 24.5% increase compared to net earnings of $54.6 million in the prior year quarter. Diluted earnings per share were $0.59, a 28.3% increase compared to diluted earnings per share of $0.46 in the prior year quarter.

“I am pleased to report solid financial and operational results in the first quarter. The next-gen console business is meeting our targets, our digital properties continue to grow and our new tech brands segment is positively contributing to our profitability,” said CEO Paul Raines. “As we discussed at our investor day, GameStop is well positioned to use its strengths to achieve growth from its diversified business segments: gaming, mobile, wireless and consumer electronics.”

For the second quarter, GameStop expects a comparable-store sales increase of between 12% and 19%, and diluted earnings per share to range from $0.12 to $0.20, representing a 33% to 122% increase over the prior-year quarter.

For the full year, the company is maintaining its previously announced diluted earnings per share guidance range of $3.40 to $3.70. It expects a comparable-store sales increase of between 6% and 12%.

 

 

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