GameStop says Q1 earnings will beat estimates
By Danny King -- Video Business, 3/18/2008
MARCH 18 | GameStop said its fiscal first-quarter profit will beat analyst expectations as same-store sales continue to surge on demand for videogames from such publishers as Nintendo and Take Two Interactive. Fiscal fourth-quarter earnings beat the high end of its estimate from last month on lower taxes overseas.
First-quarter earnings will double to as much as 33¢ a share as same-store sales increase as much as 25% on titles such as Nintendo’s Super Smash Bros. Brawl and Take Two’s Grand Theft Auto game franchise, the company said today. Analysts forecast first-quarter earnings of 29¢ a share.
GameStop’s growth amid a U.S. economic slowdown is illustrative of a customer base that’s boosting its gaming spending while cutting back on other forms of entertainment such as music purchases. Last year, U.S. consumers spent $9.5 billion on computer-game software, up 28% from a year earlier, according to NPD Group. Teens spent 41% more on videogames last year while spending 45% less on CDs, NPD said last week.
“We can’t find evidence of the economy affecting our business,” said GameStop chief operating officer Daniel DeMatteo during a conference call with analysts. “We are seeing comparative store growth as consumers travel less and stay at home more.”
Earnings per share will grow at least 25% for both fiscal 2008 and fiscal 2009 as the company expands overseas. Additionally, hardware sales will benefit because Sony’s Blu-ray victory in the next-generation DVD format war will boost sales of Sony’s PlayStation 3 console, said GameStop chief executive officer Richard Fontaine.
Profit for the fiscal fourth quarter, which ended Feb. 2, surged 46% to $189.8 million, or $1.14 a share, more than the $1.12 high end of the company’s Feb. 20 estimate, as overseas taxes were lower than the company expected, said chief financial officer David Carlson. GameStop said last month that January same-store sales beat its forecast despite an industry-wide shortage in game-system inventory.
For fiscal 2007, earnings jumped 82% to $288.3 million as revenue rose 33% to $7.09 billion.
"New technology, demographic shifts and the diversity of games and gaming platforms are expanding the gaming demographic," said Citigroup analyst Tony Wible in a note to clients today. "This dynamic is helping to increase the size and longevity of gaming cycles, which are further enhanced by international growth opportunities, US store expansion, and GameStop’s unique ‘Used’ games business."
"We believe there is upside potential to revenue growth, especially if hardware and new software growth remains as robust as the current trends suggest," said Sterne Agee analyst Arvind Bhatia in a note to clients today.
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