GameStop sales, profits sink by millions

GameStop started its fiscal year with a spring in its step, reporting record sales and surging profits for the February-April quarter. The specialty retailer's fortunes have reversed of late, as today GameStop reported second-quarter results showing revenues and net income sliding year-over-year.

For the three months ended July 30, GameStop posted sales of $1.74 billion, down 3.1 percent year-over-year. Net income was also off nearly 25 percent, with the chain reporting $30.9 million in profits for the quarter, down from $40.3 million in the same period the year prior.

Despite the down numbers, GameStop pointed to some positive trends. First and foremost, it noted that digital revenues are up a considerable 69 percent, with used-game sales jumping 12 percent year-over-year. Given the larger profit margins on both those categories compared to new boxed titles, the company as a whole reported the highest margin rate in five years.

As for those new systems and boxed games, they still made up just over half of GameStop's sales for the quarter. On the games front, the company reported that its five best-selling titles were L.A. Noire, NCAA Football 12, Infamous 2, Brink, and Mortal Kombat.

In a postearnings conference call, GameStop CEO Paul Raines said the growth of downloadable content is driving a new cycle in the pre-owned games business and that he expects regular DLC launches for all major titles in the future. GameStop president Tony Bartel added that GameStop is actually helping push DLC acceptance among consumers. GameStop has found about half the customers who purchase DLC through its retail locations have never tried DLC previously.

The growth of DLC isn't the only source of optimism for GameStop. Bartel said the company expects to have more games with 1 million preorders or more between now and the January end of the company's fiscal year than it has had in its entire history.