GameStop profits down but digital sales surge 69%

As pre-owned and digital sells, slow hardware and lack of new software hit bottom line in Q2

By Matt Martin.Published Thursday 18th August 2011, 12:59pm GMT

Specialist retailer GameStop saw sales drop 3.1 per cent for the second quarter to $1.74 billion, due to slow hardware sales and a lack of new software releases compared to the same period last year.

However, digital sales for the retailer surged 69 per cent exceeding expectations, while the second hand market continued to grow with a increase of 12 per cent.

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Profits were down just under $10 million from $40.3 million to $30.9 million for the quarter.

The best-selling games for the period were Rockstar's L.A. Noire, NCAA Football 12 from EA, Sony's Infamous, Brink from Bethesda and Warner's Mortal Kombat.

"GameStop's resilient retail model enabled us to achieve our earnings plan despite a challenging period for the industry," said Paul Raines, CEO.

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"Through the back half of the year, we expect industry software sales to accelerate based on an exciting title line-up. Meanwhile, the digital and loyalty programs we have brought to market continue to gain traction with consumers and position us as a leading partner with publishers."

Second hand games and hardware accounted for 46.2 per cent of gross profit during the period ($292.4m), with digital included in the 'other' category, which accounted for 41.7 per cent ($98m).

New hardware accounted for 7.5 per cent of gross profit ($20.8m) and new game sales 22 per cent ($132m).

Used video game product (hardware and software) accounted for 36.3 per cent of sales in the second quarter, compared to 34.4 per cent from new software, 15.8 per cent for new hardware and the 'other' category accounting for 13.5 per cent.

For the fiscal 2011 year GameStop expects earnings per share of $2.82 to $2.92, a 6.4% - 10.2% increase over 2010.

UPDATE: Added breakdown of gross profit by category.

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