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GameStop profit plunges despite surging sales

By Patrick Caldwell, GameSpotPosted Aug 17, 2006 11:02 am PT

Summer doldrums, EB Games merger cause retailer's Q2 earnings to fall 40 percent, even as sales spike 43 percent.

Although GameStop's sales jumped an impressive 43 percent during the second quarter of its fiscal year, the game retailer posted a 40 percent drop in profit, a larger drop than expected. This morning, after GameStop reported earnings for its May-to-July quarter, its stock price fell almost $2, or about 4.15 percent, as of press time.

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GameStop chairmen Dan DeMatteo and Dick Fontaine like Microsoft's new XNA development software, but they don't expect it to have a big effect on the retail business.

The retailer's sales rose to $963.3 million from $415.9 million, but the company's cost of sales more than doubled, to $664.1 million from $287.8 million. GameStop's profit fell 40 percent, to $3.18 million from $7.9 million, but the company saw a glimmer of good news as its used-games business grew 9 percent over the same quarter last year.

Of course, at the same time last year, GameStop--the largest video game retailer in the United States--was not carrying out a merger with former competitor Electronics Boutique. The separate GameStop and EB Games inventory systems were combined in March, and now the two brands' retail stores are connected to operate under "a single replenishment system," said president Steven Morgan.

"These completed tasks essentially end the integration of GameStop and EB Games," he said during a conference call with analysts this morning. "What now remains is the fine-tuning, enhancements, and the physical rebranding of our stores. But this organization is now officially on one system, one field organization, as one great company."

Citing strong sales of the Nintendo DS and the Xbox 360, GameStop said that Nintendo's New Super Mario Bros. and Electronic Arts' NCAA Football 07 were its two best-selling games during the quarter. The company expects next week's Madden 07 to set preorder and sales records for the store, as "tremendous, pent-up demand" for Xbox 360 games rises.

The release of the Nintendo Wii and Sony PlayStation 3--for which sections in 4,400-plus GameStop retail stores will be carved out in September, the company said--and the upcoming holiday season will increase the number of people buying games, said Lazard Capital Markets. After GameStop's conference call, the analyst group issued a statement recommending buying shares in the company.

"While there are still several significant risks associated with the console-transition period, we believe that positive sales trends are likely to continue through at least 2007," said Lazard analyst Colin Sebastian.

104 Comments

  • lordoverallbaby

    Posted Aug 27, 2006 7:34 am PT

    thank you bobby845, i love the kind words and well thought out points. hopefully folks will listen and learn from the vast majority of those who posted to this thread and avoid ebgamestop. remember shop local and keep your hard earned dollars in your hometown working for you.

  • bobby845

    Posted Aug 26, 2006 9:55 pm PT

    OH MY GOD,toliver01eb... how can you stand to even write such DRIBBLE... Do you REALLY think GAMESTOP gives a rats @$$ about you trying to defend them with all that nonsense????...or maybe u should give us all you REAL name so they, (GS) can give you a 10 cent raise!!!
    ..look,... it's soo simple, EVERYTHING gamestop has,..is off the backs of their employees who get nothing but pi$$ed on in the end eventually,..
    not to mention the poor kids who get swindled every day into trading in their games ,they may have mowed 50 lawns for... (and don't try to say they don't cuz i've been there,).... and they don't care how old u are or if your parents are aware..as long as they get what they want!!!
    and if w are all smart,.. we'll go somewhere else... and MAYBE,,prevent the crash i am still predicting which would be(in my opinion...).be largely due to them!!.......GREED has typicaly been the cause of many a downfall... when the ALLMIGHTY DOLLAR becomes SOOO much more important than either the people who got them there in the trenches so to speak,.. every day!!... (their employees),
    and the customers who's money now sits in THEIR pockets!!!!!!!
    ................OH GOD,... don't EVEN get me started again!!!......
    and BTW thanx lordoverallbaby!!

  • lordoverallbaby

    Posted Aug 24, 2006 5:08 pm PT

    Glad you could admit that i took you apart but hmmm once again you chose to lie and evade rather than answer any questions. thats cool, its clear you don't have the answers so you instead try and rather lamely attack someone, i answered you point for point ripping your poorly thought out arguement to shreds and now you are clearly upset because you realize you cannot fool folks with your lies. I guess we won't here from you again like you said? correct? oh wait! nope! you just were lying about that as well now you are back and you have grown so frustrated that you accuse me of trying to save the world. well if its your terrible company that is ruining it than i guess maybe i am or at least i am trying to save some folks towns from such an ugly parasite of a corporation. and i love your awesome little jewel: "besides you know nothing about what comany's do for the cummunity" ummmm have you been digesting what you read or just reacting? i have stated just what one (here let me help you with this tough word) company is doing for local communitys, if you were paying attention you would know that. and now you can respond with more poorly drooled out thoughts......

  • toliver01eb

    Posted Aug 23, 2006 12:55 pm PT

    Dismantled me because you wrote an essay about nothing. You quoted me but had no valid points. The only ass is you, I stated nothing but facts. Wake up and smell the coffee JR what are you trying to save the world ?? besides you know nothing about what comany's do for the cummunity. Do some research because Obviously you don't have a clue.

  • lordoverallbaby

    Posted Aug 23, 2006 6:37 am PT

    rightttttttttttttt thats why you decided to cut and run rather than dodge anymore of my points. i understand if someone had just owned me like i dismantled you, i might run away to mommy as well. buh bye! and heres yer sign

  • toliver01eb

    Posted Aug 22, 2006 7:45 pm PT

    You have not made one valid point after all that writing. what a waste of my time and yours.....

  • lordoverallbaby

    Posted Aug 22, 2006 8:32 am PT

    wow sparky when you get it wrong you really go waaaaaaaaaaaay off the mark dont ya? and isnt it interesting that you cannot refute a single lie you spoke of that i shot down. then you try and ASSUME that i work for one of those "mom and pops" you seem to hate soooo much, which i don't, sorry toli. but remember what happens when you ASSUME something toli? yep you make yourself out to be the huge ass you clearly are. lets see how should i rip your newest little missive apart? lets start with your statement "Man I don't own EB/GS so I could careless what you think" ummm while you are certainly "careless" i never said you "owned" a ebgamestop sooo i guess you were off out there in left field on that one. its ok i am sure you will redeem yourself with your nice gem of wisdom, which was: "and for the records not many company do anything for Vets especially Mom and Pop." again you ASSUME things. and while "records" is something really important, probobly more so than "record" we all should defer to your expansive ignorance. but alas, i already named one chain that did what you claim "company" would not do. And more companys should support our troops dont ya think? on to the next gem or in yer case germ: "I leave on this note: As a consumer you should always shop around regardless of what your personal feelings are. I shop at best buy, circuit city and walmart, whenever there's a deal I jump on it . " Umm nope wrong again. this is clearly the sort of shortsighted foolish thinking many Walmarters fall into. by shopping at companys that do not reinvest in your hometown you are only hurting yourself, if you really want to shop smart than price compare, go also where you are given awesome customer service, as a consumer demand that you and your community are treated with respect, this is a free market and if you just give up like toli here and become a drone than the Walmarts and ebgamestops will treat you like just that and take you dollars for granted. Also another smart shopping tip is to buy online, quite a few online sellers are normal folks like myself and Bobby845. When you shop online at least your cash is going to a person and not a company who will not reinvest in your hometown. the best part of this statement was his beginning in which toli says he is leaveing and then like a house guest who has over stayed his welcome his drones on some more: "Oh and 99% of real gamers shop at EB/GS thats why they are the largest in the industry" WOW, talk about not knowing the facts, ebgamestop got to be so huge the old fashioned way, when they couldn't run out of town the "mom and pops" with Walmart tactics they then bought out the stores, THATS how they became a fortune 500 company and thats also how ebgamestop became ebgamestop, one fish took over the other and this board is nothing but a long list of how bad that was for those employees. Real gamers don't shop at ebgamestop by choice or for the overpriced, damaged games and lackluster service. rather a small percentage shop there because they either dont feel there is anywhere else to go or are not aware of where else to shop. and now toli saves his best wit and wisdom for last, and i quote without changeing anything: "You can call me a drone all you wan't I have everything I want and more because I work for a good company that pays well. (Before you GA's say a word I meant pay well for SM)" UMMMM ok, you are a mindless drone who covets things, nuff said. but wait he comes back yet again after he is done: "Oh and by the way, you shouldn't bash your competitors, not very professional. Try doing some Marketing or something. " now if i worked for a game store this little jewel would make some sorta sense but like i can say is when you ASSUME something that makes you an.........

  • toliver01eb

    Posted Aug 20, 2006 6:50 pm PT

    Oh and by the way, you shouldn't bash your competitors, not very professional. Try doing some Marketing or something.

  • toliver01eb

    Posted Aug 20, 2006 6:48 pm PT

    Obviously you work at a Mom and Pop Shop!! Man I don't own EB/GS so I could careless what you think and for the records not many company do anything for Vets especially Mom and Pop. I leave on this note: As a consumer you should always shop around regardless of what your personal feelings are. I shop at best buy, circuit city and walmart, whenever there's a deal I jump on it . Oh and 99% of real gamers shop at EB/GS thats why they are the largest in the industry, knucklehead get a clue. Thats why EB/GS is a fortune 500 company. You can call me a drone all you wan't I have everything I want and more because I work for a good company that pays well. (Before you GA's say a word I meant pay well for SM)

  • lordoverallbaby

    Posted Aug 20, 2006 11:47 am PT


    clearly toliver01eb you are the ebdrone your name paints you as, for one thing you cannot even try to lie your way around the fact that your "wonderful" company dosent do a damn thing for vets, the local communitys or invest in the towns they suck cash from, so you avoid that issue completely then you attack everyone, lets see: 1. you are right no one holds a gun to your customers head and thats why folks should go elsewhere for better service, prices and treatment and if you read anything here you will see that 99% of the folks said they do just that 2. right again, and again you point out what 99% of the folks said in this thread, "go elsewhere and get more than from ebgamestop" 3. ebgamestop rountinely violate their own policys and DO NOT allow folks to return games oh and i am sure everyone here can name a company who lets customers return something thats been opened if there is an issue, i can even name one: Video Games Etc! allows you to return games within a week and longer in some cases with less restrictions the ebgamestop to name just one company, so get a clue pal. 4. uh any place the takes games in on trade will tell you this, duh, thats the whole point of trade in. its just that most other companys give you more 5. uh the local chain here, which you look down your nose at gives you 20% off new or used games and dvds and also gives double what ebgamestop gives in credit AND regularly sells used games AND dvds 2 for 1!!! The statement about local chains overchargeing is a bladface lie or at the very least a blanket statement that one could even accuse ebgamestop of pulling themselves. Before you start your lies get some facts Jack! Heres yer sign.

  • toliver01eb

    Posted Aug 20, 2006 9:08 am PT

    All I see here is a bunch of folks who don't understand how to run a business. first of all EB/GS don't hold a gun to your head and make you trade in your games. Second, in order to make any money off of trades EB/GS can't give you what you paid. Third, other retailers don't let you return a damn thing open, EB/GS allows you to return a use game (a benefit for buying used) within 7 days which in alot of cases is better than Gamefly because you can play it return it within a hour if you want. Fourth, The games you just wish you never bought you can still get something for them and buy a game you like. Fifth,Can you go to Mom and Pop shop and get 10% off used or trade in 2 horrible 360 games and get any game of your choice for $9.99? I do understand that some EB/GS Employees just dont get how important the customers are to them. I will also Acknowledge the fact that developers don't get any profit from used games but the profit made from new games and systems, companies like EB have no choice but turn to used. Mom and Pop shops are good in some aspects but alot of the time they over charge because they have to buy the merchandise from the same folks you buy games from just to have it and stock.

  • Riverwolf007

    Posted Aug 19, 2006 4:51 pm PT

    Holy cow where in the country are you guys at that you are still in the company for four years? in my area there hasn't been an employee in any of the ebstops thats made it for longer than one year.

  • lordoverallbaby

    Posted Aug 19, 2006 3:45 pm PT

    bobby845, the solution is very simple, and i repeat: i would encourage everyone to buy their games at the locally owned and operated companies and not some parasite company like ebgamestop. this scum sucking monster dosent even keep its deposits from each days sales in your local banks! instead the deposits are transfered out to the main bank of the headquarters. this isnt to mention that, at least where i am, the locally owned chain gives more both in cash and credit than ebgamestop. Ebgamestop dosent even offer military discounts to vets or their families! if you're gonna spend your hard earned cash than when give it to these toads when they won't reinvest in your hometown?

  • bobby845

    Posted Aug 19, 2006 11:25 am PT

    Let's just make this REAL SIMPLE!!!!..... gamestop $U@K$!!!!... thet take advantage of their customers(mainly kids!),.

    by harassing them into trading in their games EVERY TIME THEY EVEN WALK IN THE DOOR!!..and to buy their $h!TT% scratched/missing manual used crap that the employees are FORCED to take because of gamestop's GREED!, even though they KNOW it isn't fair to ask anyone to by a scratched /missing manual game ... but AGAIN,..not THEIR FAULT,..THEY HAVE TO!!!
    ..........(trust me i know al too well!!)

    ... the develpers who make these games who now sell much less than before and lose money because of,..while gamestop gets FAT at their expense..

    .and their employees by forcing them to lower their personal standards in order to appease their GREEDYASS employer .or lose their jobs as a result!!

    ....in MY OPINION,,,,(JUST AN OPINION)... when you put all of these things together i think ...like it or not,... we are headed towards another VIDEOGAME MARKET CRASH!!!!! as was in '83-'84...
    ......NEED I SAY MORE???

  • toliver01eb

    Posted Aug 18, 2006 9:14 pm PT

    Toads!! thats funny!!

  • ken_gamer

    Posted Aug 18, 2006 6:39 pm PT

    Wow Autolycus, just wow. All I have to say is STFU.

  • lordoverallbaby

    Posted Aug 18, 2006 6:36 pm PT

    i would encourage everyone to buy their games at the locally owned and operated companies and not some parasite company like ebgamestop. this scum sucking monster dosent even keep its deposits from each days sales in your local banks! instead the deposits are transfered out to the main bank of the headquarters. this isnt to mention that, at least where i am, the locally owned chain gives more both in cash and credit than ebgamestop. Ebgamestop dosent even offer military discounts to vets or their families! if you're gonna spend your hard earned cash than when give it to these toads when they won't reinvest in your hometown?

  • relset

    Posted Aug 18, 2006 3:16 pm PT

    maybe too many cracked and hacked illegal games!

  • toliver01eb

    Posted Aug 18, 2006 2:44 pm PT

    I agree give them what they deserve, thats exactly why I do everything I possible can to get my staff more money and promotions. I have had 4 of my previous ASM become store Managers. I hope I didn't come off like I'm better than everyone else, I put in my time to make what I make. The manager before me in the store that I run was making 8k more than I am and he had the store Jacked. Why was this clown making more than me? I guess thats just the way it is sometimes.

  • Autolycus

    Posted Aug 18, 2006 1:47 pm PT

    aerisgainsboro thanks for the input, it was well said without trying to brag or come off better than anyone else. I cry because a handfull of corporate greed is what is keeping GS/EB from becoming a much better company. give them the benei's they deserve, the hours they deserve, the PAY THEY DESERVE, (even if it means skipping your precious bonus [in regards to SM+]) and you'll see the company skyrocket in profits withintg three years. But gamestops muckity muks havent learned that yet and I highly doubt theya re going to. Because what it really comes down to is their greed and only their greed. Customers don't matter, employee's dont matter...

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