GameStop Bucks Trends With 2009 Retail Sales Increase

Despite industry-wide retail contractions last year, leading U.S. and international video game specialty retailer GameStop says its just-ended fiscal 2009 brought the second-highest earnings in its history. In its fourth quarter, which ended January 30th, 2010, it saw sales rise 0.9 percent year over year to $3.52 billion, although comparable store sales fell nearly 8 percent and profits dropped 7.1% to $215.9 million. GameStop's full-year view of 2009 also sees comparable store sales -- which take into account revenues from stores open for a year or more -- down 7.9 percent. But total sales, which include those for both new and used games, rose 3.1 percent to $9.08 billion during the year, with profits that fell 5.3 percent to $377.3 million. But the company still believes it's holding its own: "GameStop delivered its second highest earnings year ever in fiscal 2009, in spite of the weak worldwide economic environment," says CEO Daniel DeMatteo. "We saw global market share growth as new software sales increased 1.2 percent," DeMatteo adds. He says the company plans to continue investing in new stores and "strategic initiatives to strengthen our relationship with our customers." To this end, the company's allocating $75 million to open some 400 new stores and $125 million in improving and refurbishing existing stores, plus "loyalty program enhancements". It's also set aside $100 million for investments and acquisitions, and $300 million for share repurchase programs. "In 2010, we see great opportunity to deliver earnings growth by improving global operational efficiencies, expanding our leading market share and utilizing the buy-sell-trade model to drive new and used software sales," he says. The company expects "current market trends" to lead to 4-6 percent total sales growth in the year ahead, forecasting software sales up 2 to 5 percent even alongside an anticipated 5 to 15 percent hardware decline. Lazard Capital Markets analyst Colin Sebastian calls the results "better than feared," and says GameStop's results beat expectations." "Following the company’s post-holiday update in early January, we believe that sales trends stabilized and that GameStop maintained share on key New Year releases, such as Darksiders and Mass Effect 2," he says. At 5 percent up, GameStop's new software sales are beating industry trends that actually show 6 percent declines -- "suggesting that GameStop’s core consumer base remains loyal and active despite increasing overtures from big box and online retailers," says Sebastian.