GameStop Is No Ordinary Retailer

The world’s largest video game retailer, with over 4,400 stores, has not been slowed by the current economic environment. GameStop's (GME) results have continuously dazzled Wall Street. Last month they announced better than expected numbers across the board. Their quarterly profit rose 46% largely, in part, due to strong video game sales of Call of Duty 4 amongst its best selling games. They are forecasting good results for this quarter and plan to open over 575 stores over the course of the year. Their revenue also jumped to $2.87 billion, almost 25%.

GameStop is also able to predict that it will earn up to $2.34 per share this year and toward $3.00 in 2009. That is 25% annual earning growth if these numbers are reached. Credit Suisse analyst Gary Balter believes that GameStop can sustain 30% earning growth over the next few years even with a difficult operating environment.

Janco Partners' analyst Mike Hickey believes the release of Grand Theft Auto IV could net GameStop $100 million in one week. The highly anticipated game will be released April 29th worldwide. Expect sales of the game to sizzle heading into the summer.

GameStop has also continued expanding. They just purchased Free Record Shop in Norway. The almost 50 stores will join the 110 they currently have in the Nordic Region. With the cash on the balance sheet they can continue buying competition.

Their used video game business could also ignite their sales. They usually offer customers store credit for their games then resell new games at just a fraction below the new game sticker price. The used video game products industry generates $1 billion revenue per year in North America. A staggering 50% is gross margin.

PwC's "Global Entertainment and Media Outlook" report estimates that by 2011 the worldwide video game market will be worth almost $49 billion dollars. You don’t want to be on the sidelines as this industry continues upward.

Disclosure: I do not currently have a position in GME.

Comments

[User 166614]

I don't like EB-Games/Gamestop used game buisness. A majority of used games that I have purchased are scratched, and sometimes missing the original box or instruction manual. They should raise their standards for used games. All of my buisness has gone to Amazon, where sellers state the condition of products.

[Brian W]

I like Gamestop used games, because I don't trust random people on Amazon. At least if it is scratched, I can bring it back to Gamestop that day. Amazon I have to send it and hope someone honors that the game is scratched.

[yvette 1]

i think any games you have purchased thru Gamestop that were not to your standards would have been gladly exchanged or given credit if you would have just asked. The customer srevice as well as game quality at the coeur d alene store here in idaho is excellent and the manager jeff would have been mor the helpful come here and give them a try you will never shop amazon again!!

[seppel29]

Gamestop has been and will be the only place I get my games. I play XBOX 360, PS3, and computer games and when or if I have an issue Gamestop has always fixed it. GME is going to rise when GTA IV (TTWO) releases as well later this year when (ATVI) releases Starcraft and the new World of Warcraft expansion.