Electronics Boutique Announces Reduced Profit

Major North American video game retailer Electronics Boutique, which is in the process of merging with rival GameStop, announced its second quarter results, and though total revenue increased 23.9% to $448.3 million from $361.9 million in the comparable period last year, the company's profit for the quarter dropped to $1.6 million, compared to net income of $3.9 million in the same quarter of the previous year. This drop in profit was largely due to costs incurred in the recent purchase of a 138 store retail chain located in Spain, Jump Ordenadores S.L.U., as well as costs related to the pending merger with GameStop Corp, which is scheduled to complete in October, according to the company. In fact, EB indicated that comparable store sales increased 2.6% driven primarily by continued demand for Sony's PSP and 17.8% growth in video game software sales. Second quarter gross margin on sales was 30.3%, versus 29.5% last year, due to strong sales of higher-margin pre-played hardware and software and accessories. Leading titles during the quarter, according to the firm, included NCAA Football 2006 from Electronic Arts, Star Wars Episode III: Revenge of the Sith from Lucas Arts, and Pokemon Emerald from Nintendo. Looking forward, EB reiterated its previous fiscal 2006 outlook for diluted earnings per share to range from approximately $2.34 to $2.44, slightly below analyst estimates, and EB stock was down 50c to $63.50 in after-market trading as a result.