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GameStop Sees $8.8 Billion 2008, Expects 10-12% 2009 Revenue Growth
by Eric Caoili
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February 19, 2009
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Specialty retailer GameStop expects total sales to grow by 10-12 percent to $9.68-9.85 billion in fiscal 2009 (ending January 30, 2010), despite the current global recession, according to an official statement to the stock market.
Still, the predicted increase is significantly less than the growth the company has now announced, with its fiscal 2008 full-year sales revealed as being up 24 percent to $8.8 billion, compared to 2007's $7.1 billion.
GameStop also revealed in its earnings forecast that it expects comparable store sales in 2009 to rise 4-6 percent, much lower compared to the 13.3 percent increase it saw with comparable store sales in the year ended January 30, 2009.
Though the expected growth is muted in comparison to last year's, GameStop still projects it will outperform the rest of the retail sector, even as it expects the recession to continue into the 2009 holiday season.
The company also plans to open over 400 new locations worldwide, and notes that its recent acquisition of Micromania, France's biggest games retail chain, has enabled it to secure a "major, growing foothold" in Europe.
The retailer plans to keep on expanding both in the U.S. and internationally, and says it's "open to any acquisition opportunities."
GameStop predicts that sales in Europe will reach $2 billion in 2009, adding that its operations in each of the individual European markets will bring in raised operating earnings as they approach scalability and increase productivity.
"The video game business continues to enjoy robust growth, making it the fastest growing of the many consumer goods categories," says GameStop CEO Dan DeMatteo.
"2008 marked yet another year of strong new hardware sales, which will again help drive sales of new video games in the years ahead. This trend continued in January as NPD reported US new hardware unit sales grew 29 percent, led by Nintendo’s Wii, DS and Microsoft’s Xbox 360."
He continues, "Although our trade-in model is widely known as a driver of new software sales, our exceptional growth is also a function of thousands of conveniently located stores, excellent supply chain management, and the expertise of our associates who operate GameStop stores."
[UPDATE: Commenting on GameStop's announcement, analyst Colin Sebastian of Lazard Capital Markets suggested that this announcement reflects the fact that "overall industry sales healthy, but performance is uneven."
He particularly noted: "Solid holiday numbers from GameStop support our view and checks that industry sales remain relatively healthy, consistent with historical trends amid economic downturns. However, performance still appears uneven (e.g., strong Nintendo, slower PS3)."
Sebastian concluded: "Additionally, we note that tough growth [comparisons] are likely to translate into lower industry sales in 1H09, before growth reaccelerates in 2H."]
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