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Finance

GameStop sales down 3.7% in second quarter

Thu 20 Aug 2009 1:38pm GMT / 9:38am EDT / 6:38am PDT
Finance

Retailer attributes downturn to fewer high profile software releases and effects of recession

GameStop's Q2 financial results have shown a sales drop of 3.7 per cent on last year - down from USD 1.80 billion in 2008 to USD 1.74 billion.

This decrease, Daniel DeMatteo, GameStop's CEO said today, can be attributed to "the effects of the recession and strong prior year comparisons."

"Looking ahead, as the new title release schedule improves, we expect positive earnings growth in the back half of the year," he commented.

Net earnings for the company totalled USD 38.7 million, which represented the retailer's second highest summer quarter to date, however it was still a figure 32 per cent down on last year's earnings of USD 57.2 million.

Diluted earnings per share were USD 0.23, compared to USD 0.34 in the prior year quarter, when earnings per share grew 162 per cent.

The retailer's top five selling games during the quarter were UFC 2009 Undisputed, Prototype, Fight Night Round 4, NCAA Football 2010 and Ghostbusters, said the report.

Breaking down overall sales though, the report showed that new hardware had dropped 21 per cent this quarter compared to the same quarter last year, and that new videogame software was also down 11 per cent.

Used videogame sales did see an increase however - of 19 per cent on last year, which meant used sales accounted for 32 per cent of GameStop sales. This contrasts to 36 per cent contributed by new game sales.

In terms of profit, used videogame sales accounted for 46 per cent of overall profit, while new games made up 21 per cent.

These latest quarterly results have led GameStop to issue a revised forecast for the entire 2009 fiscal year, lowering diluted earnings per share guidance from its previous range of USD 2.83 - USD 2.93 to a range of USD 2.40 - USD 2.64.

The company expects to generate a non-GAAP free cash flow of approximately USD 400 million - USD 425 million, which will include investment of USD 175 million in capital improvements, including the opening of 400 new stores worldwide.

As well as latest performance, GameStop attributed the lowered forecast to the delay of key new titles such as BioShock 2, StarCraft II and Splinter Cell: Conviction. In spite of these challenges however, the retailer said it is expecting an increase in new software sales over the second half of 2009, led by titles such as Call of Duty: Modern Warfare 2, Assassin's Creed 2 and Halo 3: ODST.

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