GameStop Console Sales Hurt By Scorpio, Neo Announcements

Microsoft and Sony announced new consoles at E3 and that hurt hardware sales for GameStop.


GameStop today reported earnings for its second quarter ended July 30 and, although the company posted an overall profit, the company's video game business brought the store down.

Total global sales fell 7.4 percent to $1.63 billion. GameStop said this downturn is partially attributable to a tough comparison to the same quarter last year when Batman: Arkham Knight and Elder Scrolls Online came out. Some of this year's new releases during GameStop's second quarter included Uncharted 4: A Thief's End, Doom, and Overwatch.

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Additionally, hardware sales fell, a result GameStop attributed to the new console announcements at E3. Microsoft announced Project Scorpio and Sony revealed PlayStation Neo during the week of the show. Microsoft also announced the Xbox One S, which went on sale at the beginning of August, meaning it's not factored into this GameStop earnings report.

New console announcements could hurt sales, in theory at least, because people might hold off buying a system today if they know a more powerful one is coming later.

New hardware sales came in at $216.4 million for the period, down significantly from $324.9 million during the same quarter last year. New video game sales also dropped, falling from $467.2 million to $382.2 million for the latest period. Secondhand sales declined as well, but not as significantly, coming in at $542.5 million, compared to $560.8 million during the same period last year.

GameStop's digital business also declined, with sales decreasing 12.7 percent.

On the brighter side, GameStop's Mobile and Consumer Electronics category saw its revenue rise 43 percent to $203.3 million, while Technology Brands revenue jumped 54.6% percent to $175.9 million.

GameStop's collectibles business saw its revenue rise 119.5 percent to $90 million, led by contributions from ThinkGeek. GameStop also called out Five Nights at Freddy's and Pokemon toys as being top-sellers.

Despite the poor results for GameStop's gaming business, the company posted an overall profit of $27.9 million, which is up from $25.3 million during the same period last year.

"As expected, the continued growth and increased profit contribution of our non-physical gaming businesses drove our second quarter results," GameStop CEO Paul Raines said in a statement. "Tech Brands sales grew more than 50%, omni-channel sales increased 16%, collectibles sales more than doubled and year-to-date, more than half of GameStop's operating earnings have come from non-physical gaming categories. These new businesses offset a tough quarter for video gaming and prove that our diversification strategy is succeeding."

It's also worth noting that GameStop no longer refers to itself as a video game retailer first and foremost. The official line is that GameStop is a "global family of specialty retail brands that makes the most popular technologies affordable and simple."

GameStop will hold an earnings call starting at 2 PM PT / 5 PM ET to discuss these results. Check back with GameSpot later for more.

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