GameStop's Q1 Results Up On Xbox 360, KH2

Officials from Grapevine, Texas-based video games retailer GameStop have announced strong financial results in the company's first quarter ended April 29, 2006, including a 13 percent rise in profit, bucking the generally depressed state of the video game software market with strong Xbox 360 hardware and overall game sales. Profit for the company for the quarter was $11.7 million, up from the previous year's $10.3 million, and operating earnings surged 126 percent to $38.1 million. In addition, revenue more than doubled to $1.04 billion, in comparison to $474.7 million over the same period a year ago. though comparable store sales decreased 3.3% during the first quarter, a slightly downbeat result, but beating previously announced guidance of -7.0% to -9.0%. The company attributed the overall growth in profit and revenue to the accelerating Xbox 360 hardware sales boost, as well as the sale of high profile sofwtare titles such as Elder Scrolls IV: Oblivion and Ghost Recon: Advanced War Fighter, in addition to Kingdom Hearts II, which served as the quarter's best-selling title for GameStop, which operates 4,565 retail stores across the United States and in fourteen countries worldwide, as well as the GameStop and EBGames game retail websites and Game Informer magazine. "Our exceptionally strong results this quarter are due primarily to the improved flow of Xbox 360 hardware, early acceptance of the $59.99 price point for next generation software, and the successful completion of key integration strategies between GameStop and EB Games," said R. Richard Fontaine, chairman and chief executive officer. Regarding the recent merger between both GameStop and competitor Electronics Boutique, Fontaine commented: "While there is more work that needs to be done to fully complete the merger, we have concluded many critical facets of the integration, including the roll out of GameStop's inventory management system to EB stores, applying best practices to the company's operations, the closing of the West Chester general office and the Coatesville distribution center, and restructuring of field management. We continue to have great confidence in our new and used business model as an earnings driver while the industry moves through the transformation to multiple new hardware platforms." Looking forward, for the second quarter of fiscal 2006, comparable GameStop store sales are projected to range from -2.0% to +1.0%, and the company is raising its full year fiscal 2006 diluted earnings per share expectations to range from $1.93 to $2.03. As a result, the company's shares were up $1.65 in early trading to $46.25.