EB Games' quarterly profit doubles

  • By Staff, GameSpot
  • Posted Aug 19, 2004 4:11 pm PT

Games retailer looks to used games and increased expansion as keys to continued success.

Earlier this week, GameStop threw down the game-retail gauntlet with a triple threat of increased revenue, profits, and margins. Not to be outdone, rival Electronics Boutique--known as EB Games to most--posted its own set of strong financials today.

For the quarter ending July 31, EB Games’ total revenue was $362 million, up 19.8 percent year-over-year. Its net profit rose to $3.9 million, more than double the $1.7 million posted last year. The solid numbers were a result of strength in both software and hardware sales. Games such as Spider-Man 2 and NCAA Football 2005 were the drivers for software sales, while hardware sales were boosted by price cuts.

Increasing margins also helped EB’s bottom line. Shipping expenses were down, and sales of preplayed games were up, pushing the company’s gross margin from 27.0 percent to 29.5 percent. The higher margins that preplayed games provide explain why they’re part of EB’s three-pronged attack, as explained by CEO Jeffrey Griffiths: “The three key elements of our strategy to further strengthen the business [are] growing our domestic strip center locations, further developing our preplayed business, and expanding our international presence.”

The company’s international head start is an area analysts chose to highlight. Michael Pachter of Wedbush Morgan noted of Electronics Boutique, “They've already got European infrastructure in place, and GameStop is trying to catch up.” The company is still expanding at a rapid rate, opening 117 new stores during the most recent quarter to bump its total number of stores worldwide to 1,733.

Electronics Boutique’s second quarter results were achieved despite comparable-store sales declining 2.2 percent. The company, by its own measure, is poised for an even better third quarter, projecting comparable-store sales to increase by 4 to 6 percent.

Looking toward the rest of the year, Griffiths enthused, “We anticipate strong industry trends based on a growing installed base and several major software launches that will take place in the coming months. As such, we feel very positive about our prospects for the balance of the year.”

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