GameStop rides Red Dead sales to 3.4% growth in Q2

Mario Galaxy 2, UFC 2010, Starcraft II, and NCAA Football 11 round out top sellers; specialty retailer says it has "not seen any impact" from publishers' Online Pass schemes, increased competition in market.

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The US game industry as a whole continues to limp along with shrinking sales, but it's a trend not reflected in GameStop's bottom line. The specialty retailer today released its financial figures for the quarter ended July 31, showing year-over-year jumps in sales and profits.

GameStop is brushing off EA's Online Pass like a halfhearted arm tackle.
GameStop is brushing off EA's Online Pass like a halfhearted arm tackle.

GameStop revenues for the quarter totaled $1.8 billion, up 3.4 percent from the previous year's second-quarter haul of $1.74 billion. Although the company is most notable for its used gaming business, it saw a 5.3 percent spike in sales of new games. According to the company, the five best-sellers for the quarter were Red Dead Redemption, Super Mario Galaxy 2, UFC Undisputed 2010, Starcraft II: Wings of Liberty, and NCAA Football 11. GameStop's bottom line also improved, as the company posted net income of $40.3 million for the quarter, up 4.2 percent from the previous year's second-quarter take of $38.7 million.

In a postearnings conference call, GameStop executives played down concerns about recent trends like competing retailers getting into the used game business and publishers adopting "Online Pass" models for their games. GameStop CEO Paul Raines told analysts that the company has "seen no competitive impact" from new businesses in the used game space and has also not noticed any impact from onetime use codes packed into new releases.

As for how the company judges the effectiveness of the onetime use codes, Raines said, "We look at the title that had the first-use codes and we look at the trade volume and the used inventories on those and just haven't seen an impact yet." He said that only 25 percent of used game purchasers play those titles online, so locking out multiplayer features on used copies (as has been done with games like NCAA Football 11 and UFC Undisputed 2010) doesn't impact that audience.

GameStop expects things to continue growing. In the earnings call, chief financial officer Rob Lloyd said the company is increasing its forecast for new game sales worldwide from a range of 2 to 5 percent growth to 5 to 10 percent growth. Meanwhile, executive chairman Dan DeMatteo said the company believes the game lineup for the second half of 2010 is stronger than that of 2009, and the launches of Kinect and Move should return the gaming industry to growth.

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