GameStop's income rises 12% in fiscal Q3

PHYSICAL: Retailer gains market share on new, used videogames

By Danny King -- Video Business, 11/19/2009

NOV. 19 | PHYSICAL: Despite falling sales in the videogame industry, GameStop reported a 12% increase in net income, to $52.2 million, for its fiscal third quarter, as the largest U.S. videogame retailer appeared to gain market share in both new and used games.

Revenue increased 8.2% to $1.83 billion for the three-month period ended Oct. 31, GameStop said in a statement today.

The retailer's financial results beat both analyst estimates and its own forecast of earnings of 30¢ a share.

Same-store sales fell 7.8%, but that was less than the approximately 8.5% drop estimated by GameStop last week.

GameStop appeared to defy a U.S. videogame industry whose overall sales last month dropped 19% from a year earlier and whose October software sales declined 18%, according to NPD Group.

GameStop's third-quarter software sales increased 9% from a year earlier, while used game revenue rose 19%. Stronger software sales offset a decline in sales of consoles, where the effects of Sony's recent $100 price cut for the PlayStation 3 console was more than offset by weak sales of the Nintendo Wii.

"Given the state of the worldwide economy, we couldn't be more pleased with our results," GameStop CEO Daniel DeMatteo said on a conference call with analysts today. DeMatteo characterized GameStop's market share gain as "significant," though declined to be more specific.

GameStop raised its full-year earnings-per-share estimate to a range with a midpoint of $2.54 from its August forecast of about $2.47 and narrowed its forecast of a same-store sales decline to about 5.5% from about 6% in August. Fourth-quarter software sales will rise largely on strong sales of such early November titles as Activision's Call of Duty: Modern Warfare 2 and Nintendo's New Super Mario Bros., the company said. Modern Warfare 2 set a new five-day sales record after its Nov. 10 debut.

GameStop is looking to counter declining demand in consoles by expanding its digital business. Earlier this month, the company tapped former Ticketmaster executive Shawn Freeman to fill the newly created position of general manager of digital business. GameStop, which earlier this year launched a section on its Web site dedicated to online and downloadable games, recently acquired a majority stake in Ireland-based online games publisher Jolt and plans to broaden the number of downloadable titles it sells from its stores and Web site.