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GameStop tallies billion-dollar quarter

  • By Curt Feldman, GameSpot
  • Posted May 18, 2006 11:30 am PT

As publishers' finances fizzle, retailer reaps benefits of more 360s in channel and killer sales of Kingdom Hearts, Oblivion; scores Wii best-of-show at E3.

The thrill of bringing record revenues to Wall Street analysts was palpable in the voices of GameStop executives Dick Fontaine (chairman and CEO), David Carlson (CFO), Steve Morgan (president), and Dan DeMatteo (COO) today in the company's first-quarter 2006 earnings results conference call.

While the markets bid up GameStop shares to near its 52-week high, those executives outlined finances tallied during the February-April quarter for the Texas-based retailer.

For the 13-week period ending April 28, 2006, the specialty retailer--now the world's largest, with 4,565 stores in 14 countries--reported revenues of $1.04 billion dollars, more than twice the $475 million reported for the same quarter a year ago.

Opening today's analyst call, Fontaine called the revenue figures "outstanding."

Carlson then informed listeners that comparable store sales decreased 3.3 percent for the quarter, but he was pleased by the fact that dip was far slimmer than expected--the company had previously stated it expected comps to fall by 7-9 percent. The better-than-expected decline was "due to improved flow of Xbox 360 hardware and much higher-than-anticipated sell-through of new video game software," Carlson explained.

"Square Enix's Kingdom Hearts II topped the best-seller list for the quarter, with two Xbox 360 titles, Elder Scrolls IV: Oblivion and Ghost Recon: Advanced War Fighter, showing the acceptance of the 59.99 price point with our Xbox 360 customers," he added.

Net earnings for the retailer, which continued to make progress in the nuts and bolts of the merger with EB Games during the quarter was $11.7 million, compared with $10.3 million a year earlier.

In March, all EB stores were connected to the GameStop inventory management replenishment system, Morgan explained, and by August 14, all GameStop stores should be converted to a joint point-of-sale system.

"While there is more work that needs to be done to fully complete the merger, we have concluded many critical facets of the integration, including the roll out of GameStop's inventory management system to EB stores, applying best practices to the company's operations, the closing of the West Chester general office and the Coatesville distribution center, and restructuring of field management," Fontiane said. "We continue to have great confidence in our new and used business model as an earnings driver while the industry moves through the transformation to multiple new hardware platforms."

Longtime industry observer Dan DeMatteo gave the company line on the performance of the major console makers at last week's Electronic Entertainment Expo.

"Nintendo. Quite simply, they had a fantastic show," DeMatteo said in today's call. "Due to the innovative controllers and the stable of Nintendo properties, the Wii will certainly be desired by the core gamers, but it has the potential to expand well beyond this group into nontraditional game players."

He called a Zelda title at launch "significant," as well as the anticipated price point of the Wii, expected by all to come in lower than both the Xbox 360 and the PlayStation 3. "We view the release of a new Legend of Zelda at the Wii launch and an anticipated lower console price most significant and the most pleasant surprise of E3." He referred to Red Steel, the Legend of Zelda title, Dragon Ball Z, and Tony Hawk's Downhill Jam as "some of the most highly anticipated titles for the Wii."

DeMatteo also spoke highly of the Xbox 360, saying the "several new innovative accessories for the 360 [announced at E3] should really enhance gameplay, such as the wireless headset used in on-line gaming, and a new wireless steering well for racing games."

On the PS3 release date and pricing, DeMatteo was less enthusiastic, but still optimistic. "While there seems to be some concern about the price, we feel that given all that it delivers, it is very acceptable to the consumers that will be in the market at this time. The quantities they expect are at an all-time high range for a console launch--two million day one, another two million by the end of the year, and two million by the end of their fiscal year, March 2007."

He estimates the US portion of that allocation to be in the 35-40 percent range.

On the PC front, based on what he saw at E3, DeMatteo expects the World of Warcraft expansion pack (The Burning Crusade), Neverwinter Nights 2 from Atari, and Battlefield 2142 from Electronic Arts to be the top-selling titles through the coming year.

In the coming quarter, GameStop execs expect same-store sales to net out at 2 percent down to 1 percent up. At press time, GameStop (GME) shares were trading up almost 4 percent at $46.36.

97 Comments

  • matthew21886

    Posted May 22, 2006 9:37 am GMT

    At least Wal-Mart isn't getting our money

  • i_love_my_ds

    Posted May 21, 2006 3:47 pm GMT

    Neverwinter Nights 2? whats that?

  • StolenVex

    Posted May 20, 2006 12:33 pm GMT

    Infernal, Tuition exists right now. You attend classes, and as long as you get an A or B average, they reimburse you. It all depends on how hard you're willing to work, and come next spring I'll be doing part time schooling and full time GStop. Why? Cause to me its worth it. Oh, and some of those other features are being rolled out already, just contact the right people within the business and you can get the information you need. I haven't signed up yet because last I checked they were switching around some of the plans so I didn't want to get signed up and have it change on me.

    So, its there, or its coming. -- Also, I don't know what your experience with upper management is, but my upper management rocks, they would make those kind of compromises as long as you were willing to stretch yourself a bit to manage it all too.

    -SV

  • princeofgames90

    Posted May 20, 2006 8:09 am GMT

    Well i dont this gamestop

  • DRAMACIDE28

    Posted May 20, 2006 12:36 am GMT

    Gamestop is a rip off and there employees are the dumbest people ever! They spread more false rumors about the new consoles and games than any noob online in these forums. They give you next to nothing for your trade ins and then turn around and sell them for triple what they gave you. I buy all my games off ebay I won nba 2k6 and fight night 3, kameo, call of duty 2 , price ranges of $30 to $39 tops and thats with shipping included and they were all brand new factory sealed 360 games. I dont know why people even buy used games from them a xbox 360 used game is $54.99 you can get the same used game off ebay for $25 to $35 dollars! Gamestop is full of it people wise up and pay what you want for games not what they want you too. Also got the xbox 360 wifi adapter brand new for $55.00 dollars thank you ebay your awesome and you stink gamestop.

  • theKSMM

    Posted May 19, 2006 10:44 am GMT

    The line that got me was the one where CFO David Carlson references the high sales of XBOX 360 titles Ghost Recon: Advanced Warfighter and The Elder Scrolls IV: Oblivion as "showing the acceptance of the 59.99 price point with our Xbox 360 customers." It seems as if we could drive the price back into the traditional $40 to $50 range if we would stop buying at these high levels.

    Of course, it doesn't hurt that those are both two top flight games. Other good-but-not-great titles aren't going to do nearly as well at $60.

  • InfernalStorm

    Posted May 19, 2006 10:04 am GMT

    "[I can get paid college tuition, full medical, dental, vision -- and they're working on housing and transportation assistance too.]"

    HA!

    Keep dreaming. How long have you been employed? Medical/Dental/Vision, sure... I believe it's open enrollment for that right now. But tuition, mileage and rent? Absolutely no chance in hell that will ever happen, guaranteed.

    The only positions they *might* theoretically shell out for something like tuition for would be SM and up. What good is a tuition payment for an education you're too busy to recieve because you're working upwards of 50 hours per week? Even if you could find the time, good luck getting your DM to flex on crafting your work schedule to fit your class schedule for more than two weeks. The moment compliance rankings shift downwards, you'll be back to 100% template adherence.

  • WolfSkill5544

    Posted May 19, 2006 9:55 am GMT

    well, there goes our money to their pockets.

  • Indyguy

    Posted May 19, 2006 8:06 am GMT

    oh my oh my. I gotta say, reading through all these pages, my favorite has to be "Don't buy used at GameStop, the game publishers don't see a DIME of that! If you're going to buy, shop EBAY!"....Yeah, because the Game Publishers get a cut from every frank and johnny that sells their used games on EBAY.....lemme tell ya what. I've got a whole page and a half rant about why used games aren't bad and all that. I mean hell, if it wasn't for being able to buy used games, let's see....I wouldn't own Katamari Damacy, Shadow Hearts (all of them actually), Max Payne, La Pucelle, Disgaea, Rez, etc. Because most of the best games don't get bought, discovered, and talked about until they are out of print and no New game store sells them. Anyways.

  • chrisdojo

    Posted May 19, 2006 6:03 am GMT

    what do you expect?

  • metdevthegamer

    Posted May 19, 2006 5:57 am GMT

    The people at my local Gamestop are quite polite, given they aren't talking much.

  • ocdog45

    Posted May 19, 2006 5:40 am GMT

    money, money, money, money...........money!

  • Autolycus

    Posted May 19, 2006 5:36 am GMT

    Do everyonoe a favor and shop somewhere else. Used games HURT the people that makes them and if you have a bunch of games to sell, SELL THEM ONLINE!

    THE COMPANY treats their employees like crap so we will treat our customers like crap If you don't work there, there is no way for you to understand how stupid people really are.

    But as was said a hundred times....ALL CORPORATIONS ARE LIKE THIS. Support small business because US = Facist(which means the corporate head shots pretty much run this country).

  • thekey

    Posted May 19, 2006 4:57 am GMT

    Doesn't suprise me look at the game sales charts this week, the 360 dominated! (its about time)

    Gamestop is total domination. (Not the best software franchise, but there better than EB games the merge will be better.)

  • StolenVex

    Posted May 19, 2006 1:38 am GMT

    Heh, I feel like the most odd GameStop employee ever.

    I will bend over backwards for my customers as long as they treat me like a real person. I once had this guy who we lost his credit for his game, and it happens I mean like one in 1000 but it happens because we still haven't converted to the electronic EB system for it. He swore he had it paid in full so I just bought the game for the guy. Corporate found his credit, and he was a regular and paid me back next time he saw me. Ya know, I bet that guy will keep coming back as long as I'm there now, because he knows I will cover his back.

    What I say this for, is that each employee of ANY company is going to be different. Some of you folks say your EB guys and girls are the best, and others GameStop employees, and others Best Buy, etc etc...

    Well what if you took those same people, and mixed 'em up, you'd probably still have the same great people just in different stores.

    So I think what you've gotta do is if you have a bad experience in ONE store, don't necessarily generalize the entire company. I mean, feel free to do that if you want, but go ahead and try another store, or another company, until you find what works for you... and stick by it. I tried that myself, and I ended up working at GameStop because I LIKED the people there, and not at the other stores around.

    Oh, and for people who complain about getting paid crap... I understand. The company sucks for that, but upper echelon benefits rock. [I can get paid college tuition, full medical, dental, vision -- and they're working on housing and transportation assistance too.]

    They do compensate part timers pretty poorly, but I warn every person I hire on that it is part time, with ... "VERY FEW HOURS AT MINIMUM WAGE." -- yet the idea of working at a *game store* seems to keep that gleam in their eye.

    Oh, and hours fluxuate, its very strange. Two years ago my store got 170ish hours on average via grid... then template dropped us all the way to around 100ish, now we're back up to 130 average...

    So, it goes all over the place...

    The inner workings of a corporate giant are very complex and confusing, but if you read any of what I had to say, please keep in mind every person who you meet in any given store will be different and have a different take on what they were told to do.

    I originally followed procedure and policy like it was written in a book of GOD.

    Now I think of it as more... guidelines, to paraphrase a good movie I once saw.

    -SV

  • bizsumpark182

    Posted May 19, 2006 1:16 am GMT

    GameStop is screwing over their employees! Come on I've been with the company for a year and have still yet to get a raise from my $5.15 an hour. Thats why I'm looking for a new job. I love that GS is a videogame store and all....but the people who run the company suck! They don't know how to run a company or treat their employees. A direct quote from a higher up, "People should feel privileged to work for our company, even at minimum wage."

  • lWinterl

    Posted May 18, 2006 10:21 pm GMT

    Don't support Gamestop. If you have a locally owned business, please shop there instead. Gamestop has the right to pay their employees whatever they want, and it's the employees own fault for accepting it, but at the same time, they can afford to pay them more, they simply choose not to. In the end, they are nothing but a big corporation who is after nothing but your money. Most locally owned shops are run by people who just love games and want to earn a living through games. The same can be said about Gamestop employees too, most of them are really passionate about games, but the people up top are only interested in money.
    Also, THERE ARE GOOD DEALS AT GAMESTOP! Before I was an employee, I was a customer, and it's always been possible to find good deals if you look. Just learn how to shop. If you look hard enough, you can find those rare copies of Gitaroo Man, Rez, Cubivore, or whatever. Usually cheaper than eBay. By the way. The used prices? It's based on percentages. You're "only" saving $5, because 10% of 49.99 is 5. Where else can you go where you'll get a 10% discount (20% if you have the card!). When I worked there, people would always ask me to hook them up with my discount. It was only 15%, but wow, all of the sudden they felt like they were going to save money. People just look at it wrong. And trade-ins? Well, I've never traded anything in, but again, you have to know how to do it. Trade-ins usually work out to be 2 for 1. Not too bad, actually, but they have to be recent titles. If you're getting $1-$5, it's because Gamestop doesn't need (or want, really) you're copy of Dragon Ball Z Budokai, Madden 2002, or Splinter Cell. You get good prices on good games that WEREN'T released like two years ago and haven't already been traded-in a million times. Why would ANYONE give you good money for a game that they're way overstocked on and isn't even selling? Don't be dumb.
    Be a smart consumer. Check prices, sales, and learn about their specials. They look out for their best interests, so look out for yours. If you feel like you were ripped off, then you probably were, but it's your own fault. Next time, be a little more educated when you do your shopping.
    If it helps make the comparison. Look at Gamespot (y'know, where you are right now?). The editors seem really cool, and the passion they have for games shows. But you know what? They work for CNET. Do you think they're the ones putting up all the advertisements? Do you think they really care about you subscribing to Gamespot Plus? Well, only because their jobs depend on it, but in the end, it's all about CNET wanting your money. So don't buy into any corporations. Even companies like Nintendo, Microsoft and Sony. Don't give corporate suits your loyalty. Gamecrazy, Bestbuy, Gamestop. It's all the same. Bigwigs wanting you money. Support good small businesses.

  • tr00pa_26

    Posted May 18, 2006 9:53 pm GMT

    true yeah gamestop are jerks i just dunt noe why

  • jivanoff

    Posted May 18, 2006 9:41 pm GMT

    [This message was deleted at the request of the original poster]

  • Kfoss

    Posted May 18, 2006 8:57 pm GMT

    thats insane!... wow ...as for game stop in general well im cool with them..the ones here in texas have never screwed me over..and if anything they have helped me track down hard games and a new-used X-box console...

  • John_of_Fire

    Posted May 18, 2006 7:59 pm GMT

    I am familiar with both sides of the fence and I have to say: For the love of all things you claim Holy don't work retail!!!!! No money no future. Get grants go to College and get a Computer Science degree make lots of money and be happy. Retail is a slow death. All the money goes to stockholders.

    I like stores like Gamestop only when I can work the system; otherwise I'm the one being worked.

  • daftfan

    Posted May 18, 2006 7:34 pm GMT

    That's only for XBOX 360, wait for the launch of PS3 and Wii. The sells will be HIGHER than this numbers.

  • Knight_Rider_3K

    Posted May 18, 2006 6:19 pm GMT

    Gamestop screwed me. I'll never shop there again.

  • drack48

    Posted May 18, 2006 5:55 pm GMT

    All right, i understand the people who work there are just doing there job... but man i long for a time you could talk to a guy in a game store about games and have real opinions...and not just be pressured into reserving every game known to man.

    It's not the fault of the people who work there, please accept my apology.

    But to all the people who dictate policy around there listen up! When games can all be downloaded and we don't have to deal with your BS you will go down in flames if you don't change your ways. Ya, parents will still go in, but the hard core will get everything online.

    Same as blockbuster, they make all the employes shill everything and guess what? Will I order the movie on demand, or be pressured by a store clerk..think i go with pressing a button my remote.

    This country is in the crapper...big buisness is ruining evrything..

    How much is enough?

  • comthitnuong

    Posted May 18, 2006 5:51 pm GMT

    i live next to the fourth gamestop ever made...muhuwahahaha

  • WhompU

    Posted May 18, 2006 4:57 pm GMT

    I have a gamestop here in the very....and I do mean very....small town I currently live in. My friends work there and gripe all the time. One of them is the 3rd Key for the place and they are trying to tell him that they can't work with his college schedule and all. Morons. This place is such a hassle to go to anyway since they pretty much hire some of the worse people there. I have seen it where my friend has had to yell at people to actually do stock and they just flip him off. They have one girl there that had been working there for like 3 months and screwed up my preorder of KH2. And my friend had to come and fix it. Yeah, really great store guys! (did anyone catch my sarcasm there?

  • RidleyTJN

    Posted May 18, 2006 4:54 pm GMT

    If yo'uve noticed the trend from the other Gamestop/EB employees like Autolycus, we're all very bitter and jaded. I've been working at Gamestop in NYC for almost 5 years now (recently been promoted.) Through my entire college span. If you guys are wondering why we're always pestering you to buy used games, reserve stuff, buy the guide with the game, buy the subscription card or buy a warranty on the games is because Gamestop (and now EB) ranks us every day on how many of each we get and how good a percentage we have.

    If our numbers for the store sucks, the manager gets a write up. If he gets a write up, WE get a write up. So they literally FORCE us every day to shove this stuff down your throats. Beleive me, we hate saying "Did you bring your trade ins today?" as much as you hate hearing it. They're life blood is used games and trade ins, they live for it and year developers don't see a dime of that money. But yeah we get paid very little for the amount of work they expect us to do. They essentially want us to telemarket to all of you in person as you buy stuff. And if we don't, we risk getting in trouble. One of the District managers of the upper manhattan area witnessed a person buying a PSP with games, a reservation, and a subscription, and still saw the transaction as a failure because he didn't sell the freaking warranty for the system. Our managers are salary and are forced to work 60-75 hours on really busy weeks (like holidays) and will only get paid for 35 of those ours, the only consolation is a day off he can use later in the year which he can't really use because we get no hours to make up for him not being there.

    Overtime is also forbidden, if anyone goes over 40 hours they are fired instantly. And then as far as what you guys have to deal with in terms of employees and attitudes, its no picnic on our side either. Just today I had to deal with a guy asking me when the PSP2 is coming out complete with two thumbsticks and a 4 gig harddrive. I told him there wasn't any yet Sony hasn't made any announcements and its all hearsay and conjecture for now. And he was getting literally frustrated and angry with me and told me his friend was programming for them and its definately coming out and didn't understand why I didn't have a date. This stuff sounds ludicrous to you guys because you know the deal if you're already here but you'd be surprised how many of those customers we get in a single day. It's not like its kids either its 20 something year olds. Anyway just trying to shed light from the other side of the fence.

  • enoslives7

    Posted May 18, 2006 4:46 pm GMT

    Gamestop is a rip-off. Alot of the games they sell are pirated. If the worthless 360 is making them money, I cant imagine how much they are gonna make when the PS3 hits.

  • Tomtomtom1990

    Posted May 18, 2006 4:21 pm GMT

    Hey, it's a store. They'll try to rob you of every damn cent you have. Pretty much all stores do. Yeah, the whole "OH GOD BUY IT USED FOR FANTASTIC SAVINGS!!!!" thing is annoying, but that's their job, and they get yelled at if they don't do it right.

  • Aura

    Posted May 18, 2006 4:07 pm GMT

    yeah, i've always liked Gamecrazy by hollywood video

  • Sonicplys

    Posted May 18, 2006 4:04 pm GMT

    Yup, Gamecrazy >>>>> Gamestop

  • Gilligan1961

    Posted May 18, 2006 4:03 pm GMT

    What is interesting is that EB/Gamestop only made 10 million on over 1 billion in sales. That is only a 1% net profit margin. With over 4500 stores worldwide, that works out to an average of $2600 profit per store! That is a ridiculoulsy low profit margin. If these were independently operated businesses, they would be out of business. A downturn in the industry would eat eat that profit up in a matter of days, with the huge operating costs of such a large corporation. Many companies run the razor's edge of profitability, and end up destroying themselves. The winners are the upper management who take in big salaries, and the losers are all the suppliers who extend companies like EB credit, only to find out that they can't pay the bills anymore. Time will tell.......

  • neoand12

    Posted May 18, 2006 3:51 pm GMT

    Gamecrazy is better

  • frontier49

    Posted May 18, 2006 3:38 pm GMT

    Good call on Wii, GameStop.

    I saw at the show that GameStop managers got the Wii area all to themselves. Bastards! :-P Smart move by Nintendo, though. And I agree that Wii absolutely owned E3 this year. I loved it and can't wait for the release.

  • ConManWithGun

    Posted May 18, 2006 3:33 pm GMT

    its about damn time

  • AnimeMasters

    Posted May 18, 2006 3:33 pm GMT

    Demanding the revival of GameFactory... everyone in agreement, type 'Aye'.

  • sitgom

    Posted May 18, 2006 3:27 pm GMT

    When gamestop and eb make money from used games that doesn't affect the game industry.

  • sitgom

    Posted May 18, 2006 3:24 pm GMT

    When these guys make money from used games. The game industry is not makijng any money they are.

  • coochie_kuta

    Posted May 18, 2006 3:11 pm GMT

    in my area, electronic boutique was like a garage packed with games but i guess thats why they called it a boutique. their setup seemed to work better than the others and they became bigger and bigger, not just in my area but all over. then gamestop came along and modelled their stores like eb around here. you could walk into a gamestop and think you were in an eb. i think thats where a lot of their success came from in my area, piggie backing off the eb look. one gamestop even moved into a place that was once used by eb before it became too small for their needs.

  • spoof411

    Posted May 18, 2006 3:08 pm GMT

    [This message was deleted at the request of a moderator or administrator]

  • thatguytony

    Posted May 18, 2006 3:08 pm GMT

    So much for the industry being in trouble. Things will only get better with the release of the Nintendo Wii(save your lame jokes about the name, they've gotten old).

  • EvanO_O

    Posted May 18, 2006 2:54 pm GMT

    ebay FTW

  • drack48

    Posted May 18, 2006 2:52 pm GMT

    Why do my posts just not show up?

  • gastof

    Posted May 18, 2006 2:51 pm GMT

    yea.nintendo won the show.NINTENDO 4EVER.

  • omegared22

    Posted May 18, 2006 2:50 pm GMT

    I'm happy for Gamestop since i've been going to them for years. I have one right across the street from my house and it's like CHEERS everytime I go in there. They all know my name and they always look me out on specials and never gave me any problems. I do wish they had more old school games like Dreamcast, or 3DO or something but it serves its purpose just fine with me.

  • Kcube

    Posted May 18, 2006 2:47 pm GMT

    Danny-
    Trading games in isnt worth it anymore at Gamestop,They give you 5$ and sell for 29$.As an example they only offer 2$ for an EYE Toy.SO its easy to gain profit when offering 2$ for a 20 dollar trade in.

  • drack48

    Posted May 18, 2006 2:45 pm GMT

    The guys in gamestops are terrible!!!! I wish they had never sucked up EB. EB people are usualy pretty cool. Every dumbass gamestop guy who lives in there parents basment and makes $5.00 an hour and tells me I won't have any fun without buying the strategy guide for $25 can go suck it. These guys.. The other day I started arguing with the guy about HDMI. I asked him if his TV did 1080p ( no ones does) and he told me yes. Give me a break.

    I can't weight till we can buy everything online and not give that crap corporation anymore of our money.

  • alberto2045

    Posted May 18, 2006 2:35 pm GMT

    i think it is very good news nice GameSpot is the best, i even like the name since its almots like Gamespot but anyways i think is good good job thats wehre am buying my PS3

  • InfernalStorm

    Posted May 18, 2006 2:24 pm GMT

    The EB side of the company is haemmohraging staff members in my region right now. I've worked for Gamestop for a few years, and after transferring into an EB store recently, I can see why... That whole entire side of the company got royally screwed.

    Most of the 'growth' this company experiences is due to extensive cutbacks on several fronts. The amount of payroll they allocate to stores compared to when I first started is an absolute joke (At least two days a week with no extra coverage aside from the overlap between opening and closing employees now, versus minimum double coverage during all hours, 7 days a week), they're getting rid of higher-paid long-timers left and right... The list goes on and on. Their latest plan is capping off the previously full-time hourly employees (3rd Keyholder, Assistant Store Manager) under state full-time requirements, so as to disqualify them from benefits and vacation/sick pay.

    Clever though, you have to give 'em credit for that at least.

  • Sudland

    Posted May 18, 2006 2:21 pm GMT

    sounds cool

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