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GameStop Sees Record $1.6 Billion Third Quarter

GameStop Sees Record $1.6 Billion Third Quarter

November 20, 2007 | By Brandon Boyer

November 20, 2007 | By Brandon Boyer
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More: Console/PC



Retailer GameStop has reported record third quarter results with sales up 59.3 percent to a staggering $1.6 billion and profits up 283 percent to $52 million, thanks to the performance of Halo, Madden, Bioshock, Wii Play and Guitar Hero.

The company saw comparable growth in the quarter of 46.3 percent. Its sales were up from an already impressive $1 billion the year prior, and were ahead of company expectations. The quarter also saw the company reaching a 5,000 store milestone, with 181 new worldwide locations opening.

Quarterly sales were up 59 percent for new software sales, and 149 percent for new hardware. Top sellers for the quarter were Halo 3, Madden NFL '08, Guitar Hero III, Bioshock, and Nintendo's Wii Play.

GameStop now says it expects sales should grow between 28 and 29 percent in its forth quarter, with comparable store sales growth of between 20 and 21 percent.

Said CEO R. Richard Fontaine, "Our third quarter sales and earnings are a reflection of not only the real momentum in the video game business as a whole, but a particularly strong statement that GameStop's model continues to run ahead of the growth curve. We had an outstanding quarter both domestically and internationally, while our e-commerce division, GameStop.com, and video game publication, Game Informer, had record quarters."

UPDATE: In its call to investors, GameStop executives were quick to praise its recent GameStop Expo trade event, previously covered by Gamasutra, as launching two important campaigns.

First, the rebranding of its network of stores that previously included EB Games and Funcoland is near completion, and Fontaine says it will allow the retailer to launch national media marketing, PR, and ad campaigns. The company also used its event to train managers on the increasing need to address its new broader customer base of female and older customers.

Bundles, Reductions Driving Hardware

Looking at hardware trends, COO Dan DeMatteo said hardware sales had reached an all time high, with Wii a continuing sellout, and PS3 and Xbox 360 price reductions and new models increasing sales "dramatically." Particularly on the latter, he said the new Xbox 360 Arcade Pack has been important for the quarter and going forward.

On the handheld front, DeMatteo said the new PSP Slim bundles were also a sell-out, and the DS continues to sell well. He also warned that Guitar Hero III and Rock Band will be sell-outs throughout the holiday season, two games consumers will have to "follow the UPS truck" for.

The Importance Of Informer

Finally, the company provided an update on Game Informer, its associated print publication, which Fontaine said had reached over 3 million subscribers during the quarter.

DeMatteo said specific financial numbers weren't available, but the magazine is "indeed profitable." Fontaine added that it serves as a "broadcast channel to our best customers. We look at it as, every month, we talk to our best people about our best games."

He noted that the magazine, bundled as it is with a GameStop discount card, is the "cornerstone of [its] loyalty program," and said that in a recent survey, it was "very well received, and very well respected."

Fontaine said the magazine was "another indication of how 'all-in' we are," and added that it was a "disproportionately important, standalone division," of the company with a "unique group of editors who are very independent."

"It gives us tremendous amount of insight and information on how they valuate the games" coming in the near future, he said, and noted that in 2007, "11 of the 12 issues featured world exclusive cover stories."

"We have scrupulously kept this as a standalone entity, not affected by Gamestop per se," Fontaine concluded, and said the publication is "building a reputation for knowledgeable and informed reviews that are second to none."


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