GameStop Claims Triumph Over Recession, Holidays Sales Up 22%

GameStop stands proudly in the snow, one foot atop the neatly decapitated recession monster as it proudly proclaims its triumph over the failing economy, with holiday sales up 22% over last year.

Is the gaming industry recession proof? Maybe not as far as development studios are concerned, but from a retail perspective things are looking just peachy. Retail gaming giant GameStop, in a press release titled "GameStop Rises Above Recession", have announced that the period between November 2nd and January 3rd saw an increase in sales of 22.3% over last year, with same store sales increasing 10.2%. Good for them.

Along with the good financial news, GameStop also informs us that new software sales were up an impressive 23.5%, with Call of Duty: World at War, Guitar Hero World Tour, Gears of War 2, Wrath of the Lich King, and Wii Fit making up the top five sellers of the season. Good for them.

GameStop Rises Above Recession
Holiday Sales Increase 22%

Same Store Sales Increase 10%

GRAPEVINE, Texas—(BUSINESS WIRE)—GameStop Corp. (NYSE: GME), the world’s largest video game and entertainment software retailer, today reported record sales results for the nine-week holiday period, November 2, 2008 thru January 3, 2009.

During the 2008 holiday period, total sales were $2,856.0 million, a 22.3% increase from the prior year of $2,334.6 million. Comparable store sales for the period increased 10.2%.

New video game software sales were outstanding, growing 23.5% with many titles selling in record numbers. The top five video games sold during the holiday period were Activision’s Call of Duty: World at War and Guitar Hero World Tour, Microsoft’s Gears of War 2, Blizzard Entertainment’s World of Warcraft: Wrath of the Lich King, and Nintendo’s Wii Fit.

Hardware sales, led by Nintendo’s Wii and Microsoft’s Xbox 360, were also robust, dramatically increasing the installed base of new users that should drive software demand in 2009 and beyond.

Daniel DeMatteo, Chief Executive Officer, commented, “As expected, the consumer saw great entertainment value in video games in one of the most challenging holiday shopping seasons ever. In fact, in the midst of a serious recession, our average transaction was higher this year than last. In addition, our proprietary inventory management systems allowed us to maintain a great in-stock position during the busiest season we have ever experienced. A major highlight of the period was that GameStop’s sales grew in every worldwide territory in which we operate; a clear indication that the GameStop model works everywhere.”

J. Paul Raines, Chief Operating Officer, noted, “Our store associates did a tremendous job of making sure all of our holiday shoppers found the right systems, games, and accessories to fill their wish lists. Their hard work and knowledge of our wide assortment of game products was critical in serving a record number of GameStop customers. Of note this year, gift card sales during the nine-week period rose 15% over last year and the day after Christmas was the third highest sales volume day in GameStop’s history.”

Updated Guidance

In a very challenging retail environment, we successfully managed our business to achieve our forecasted earnings. While sales significantly exceeded forecast, gross margin rates were lower than anticipated as a result of a higher mix of hardware sales and the success of our value messaging and promotions during the holiday period. Therefore, we are increasing our fourth quarter 2008 comparable store sales guidance to +9.0% to +9.5%. We are also raising the low end of our previously announced fourth quarter 2008 diluted earnings per share guidance by $0.02, resulting in a range of $1.31 to $1.34, which represents a +15% to +18% increase over the prior year quarter.

Full year diluted earnings per share are now forecast to range from $2.37 to $2.40, an increase of +32% to +33% over the prior year. Comparable store sales are projected to increase between +12.0% and +12.5% for the full year, with total sales growing between +24% and +25%.

Note that guidance does not include debt retirement costs or merger related expenses.

Full year 2008 sales and earnings results and fiscal 2009 earnings guidance are expected to be released in mid-March 2009.