Video game and entertainment software retailer GameStop Corp. (GME) Thursday reported a 13.4% year-over-year increase in profit for the first quarter, boosted by strong sales of the recently launched Nintendo DSi handheld system, and sell-thru of new video games that bucked the economic slowdown. Quarterly revenues also rose 9.2%. Earning per share for the quarter increased 13.5% and came in line with analysts' expectations.
The company also provided earnings forecast for the second quarter, below consensus estimate, while warning on a slowdown, as well as reiterated its earnings outlook for the full-year 2009. Following the announcement, the company's stock is trading down more than 15%.
GameStop, which operates 6,244 retail stores in 17 countries worldwide, is the world's largest video game retailer and sells its products through its GameStop, EB Games and Electronics Boutique trade name stores, and websites, including GameStop.com and EBgames.com, as well as 'Game Informer' video game magazine. The company is also seen pricing its video games at a consistent price of $59.99 per title.
In a statement, chief executive officer, Dan DeMatteo said, "During the quarter GameStop sustained its strong earnings growth momentum and exceeded earnings guidance despite less than planned comparable store sales. Although new video game software sales declined by 2.8%, lower-priced used products grew a robust 31.9%, illustrating that value is becoming more important to our customers."
The company added that it continued to improve operating margins, build brand and value awareness with consumers, and gain market share as it expand the video game market worldwide. The company also continued to profitably manage business through the global recession by effectively managing its buy-sell-trade model and maintaining tight expense control.
First Quarter Results
The Grapevine, Texas-based Fortune 500 and S&P 500 company reported net earnings of $70.43 million or $0.42 per share for the first quarter, up 13.5% from $62.13 million or $0.37 per share in the prior-year quarter. The results for the latest quarter include debt retirement costs of after-tax $1.8 million or $0.01 per share.
On average, 16 analysts polled by Thomson Reuters expected the company to report earnings of $0.42 per share for the first quarter. Analysts' estimate typically excludes special items.
The results were in line with the company's own estimate. In mid-April, GameStop reiterated its earnings forecast in a range of $0.40-$0.42 per share, an increase of 5%-10% from the year-ago quarter.
Total sales for the quarter increased 9.2% to $1.98 billion from $1.81 billion in the same quarter last year, but narrowly missed Wall Street analysts' consensus estimate of $2.00 billion.
Comparable store sales for the first quarter declined 1.5%, lower than expected, due to a slowdown of new console sales as well as sharper recessionary effects in Europe. The company projected comparable store sales to range from flat to up 2%.
Sales for the quarter were boosted by the launch of Nintendo DSi handheld system, as well as strong sales of new video games released in February and March, including Capcom's "Street Fighter IV" and "Resident Evil 5", Microsoft's "Halo Wars" and Sony's "Killzone2".
However, the company added that the sales cannot be compared to the tremendous success of Grand Theft Auto IV from Take Two Interactive and Nintendo's Super Smash Bros. Brawl in the prior-year quarter.
Peer Performance
Among GameStop's peers, Seattle, Washington-based online retailer Amazon.com, Inc. (AMZN) in late April reported a 24% year-over-year increase in first-quarter net income to $177 million or $0.41 per share, helped by better-than-expected sales from the Kindle electronic bookreader introduced during the spring season. Quarterly net sales rose 18% to $4.89 billion from $4.13 billion last year. Excluding the unfavorable impact from year-over-year changes in foreign exchange rates, net sales would have grown 25%.
Another peer, Richfield, Minnesota-based specialty electronics retailer Best Buy Co., Inc. (BBY) is scheduled to announce financial results for the first quarter on June 16. Analysts expect the company to report earnings of $0.34 per share on revenues of $10.11 billion for the first quarter.
Segmental Details
Sales of new video game hardware increased to $395.9 million from last year's $339.0 million, and sales of new video game software declined 2.8% to $770.5 million from a year ago. Sales of used video game products surged 31.9% from last year to $548.5 million, and other sales edged down $0.2 million to $265.9 million from a year ago.
New video game software accounted for 38.9% of the company's total sales, new video game hardware accounted for 27.7%, used video game products accounted for 20.0%, and other sales accounted for 13.4%.
Other Metrics
Operating earnings for the first quarter increased to $128.45 million or 6.5% of total sales, from $109.90 million or 6.1% of total sales, in the prior-year quarter. Selling, general and administrative expenses were $375.83 million or 19.0% of total sales, higher than $328.67 million or 18.1% of total sales, in the year-ago quarter.
Gross profit for the quarter was $542.11 million, up from $473.41 million in the same quarter last year, while gross margin percentage increased 130 basis points to 27.4% from the prior-year quarter's 26.1%.
New video game software sales generated 6.1% gross margin, new video game hardware generated 21.5%, used video game products generated the maximum gross margin of 48.1%, and other sales generated 33.4% gross margin.
Looking ahead………..
"In the second quarter, like the first, we face very strong comparisons to the prior year period due to the unprecedented number of blockbuster titles released in the first half of 2008 and a significantly more brittle global economy. We do expect the back half of this year to be stronger than the first half due to a full and wide-ranging new title lineup," DeMatteo added.
For the second quarter, GameStop expects earnings in a range of $0.28 to $0.33 per share. Comparable store sales are projected to decline 8% to 11%. Analysts expect the company to report earnings of $0.40 per share for the second quarter.
For fiscal 2009, the company continues to anticipate earnings in a range of $2.83 to $2.93 per share, representing an 18% to 22% increase from last year. The Street is looking for full-year 2009 earnings of $2.87 per share.
Comparable store sales for the year are now expected to be between flat and an increase of 2%. The company earlier projected comparable store sales to increase 4% to 6%. Comparable store sales for fiscal 2008 increased 12.3%.
Stock Quotes
In Thursday's regular trading session, GME is trading at $22.44, down $4.03 or 15.22% on a volume of 11.56 million shares. In the past 52 week period, the stock has been trading in a range of $16.91 to $52.89.
For comments and feedback contact: editorial@rttnews.com
April 17, 2026 15:29 ET The ongoing conflict in the Middle East continues to raise concerns for policymakers who worry about the impact of the supply shock and high energy prices on the real economy. Producer price data and various survey results on the housing market were the main news from the U.S. this week. In Europe, industrial production data for the euro area gained attention. GDP figures out of China and the policy move by the Singapore central bank were in focus in Asia.