GameStop Reports Lower Profits, Higher Sales In Q2

Officials from U.S. video games retailer GameStop have announced financial results for the company’s second quarter ended July 29, 2006, during which the company reported a significant 60 percent decline in quarterly profit, despite a massive 132 percent increase in revenue following the EB merger. The retailer reported that profits for the period dropped off to $3.2 million, down from $7.9 million reported during the same period a year ago. This decline was largely attributed to $20.2 million in interest expenses involved with debt the company acquired to fund its merger/acquisition with rival Electronics Boutique. The company also noted that its sales for the period were up substantially to $963.3 million, compared with $415.9 million in sales from the prior year quarter. However, the increase still came in well below earlier reported estimates of $994 million, disappointing some on Wall Street. In addition, sales from stores that were open at least one year grew 3.9 percent. GameStop commented that sales of new releases increased 8 percent over the same quarter last year, with Nintendo's New Super Mario Bros. for the Nintendo DS and Electronic Arts' multiplatform NCAA Football '07 topping the list of best-selling new titles for the period. Looking ahead, GameStop expects to see sales from stores open at least a year to increase from 4 to 6 percent in the third quarter, with an increase of 7 and 9 percent in total over the entire fiscal year. The company also expects total sales to grow between 15 and 17 percent. “A major milestone of the quarter was completing the integration of GameStop and Electronics Boutique,” stated R. Richard Fontaine, Chairman and Chief Executive Officer of GameStop. “It is a testimony to the hard work and partnership of all our team members that, with the recently completed installation of a singular, unified POS system, we have completed the integration of two sizable companies, and did so on time and without any disruptions to our business nor deterioration in customer service.” GameStop shares had risen significantly in the weeks up to the earnings announcement, since the NPD-charted rebound in the game industry over the past couple of months was expected to affect the retailer positively. But with both profits and revenues down on estimates, GameStop shares started at $43.10, down from $47.00 yesterday. However, by press time, the shares had rebounded to $45.90, down just over a dollar on yesterday's close.