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GameStop profits rise, but dearth of 'AAA' releases hurts new game sales

GameStop profits rise, but dearth of 'AAA' releases hurts new game sales

May 22, 2014 | By Alex Wawro

GameStop today reported a small boost in total global sales for the retail company's first financial quarter of 2014, which ended on May 3. The growth was driven by sales of new consoles and used software, though sales of new software dropped significantly due to what GameStop claims is a dearth of new triple-A game releases.

GameStop's total global sales for the quarter were $2 billion, roughly a 7 percent increase year-over-year. The company reaped $68 million of that in profit, up roughly 24.5 percent from the $56 million profit it reported for the same quarter in the prior fiscal year.

Sales of new consoles continue to drive the company's growth, as GameStop reported sales of new hardware rose 81 percent year-over-year, to $438 million for the quarter.

However, the sales of new software fell just over 20 percent from the same period in the prior fiscal year, down to $559 million for the quarter. GameStop reported the same problem in last quarter's financial report, which documented a similarly modest boost in global sales alongside a precipitous 23 percent drop year-over-year in sales of new software.

At the time, GameStop blamed the drop on a "greater-than-expected" decline in sales of new software for the Xbox 360 and PlayStation 3. This time the company claims the decline is "due to fewer triple-A titles being launched this year" compared to the previous one.

Income from sales of preowned products -- which often have gross profit margins of nearly 50 percent -- grew roughly 5.3 percent year-over-year, to $602.9 million. Given that GameStop actually reported a drop in the gross amount of money spent on both used and new software in the quarter, this suggests that GameStop has managed to increase its margins on sales of used software.

GameStop's quarterly sales of digital products remained flat year-over-year, dropping slightly to $56.1 million from $56.2 million.

The company also reported that its sales in its mobile category more than doubled, rising to $102.2 million from the $51 million it reported in the same fiscal quarter a year prior. That growth is due primarily to its acquisition of Spring Mobile and Simply Mac.

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