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The wait for new PlayStation 4s and Xbox Ones isn’t killing GameStop as it beats earnings estimates

Above: GameStop's used-games shelf.

Image Credit: GameStop

As retail sales slow while gamers go digital and prepare for the next-gen consoles, GameStop is still raking in mountains of cash.

The video game retailer reported $1.38 billion in total worldwide sales for the second quarter of 2013, which ended Aug. 3. While this is down 10.7 percent from $1.55 billion during the same period in 2012.

“Through two quarters, the year has played out as expected,” GameStop chief executive Paul Raines said in a statement. “During this console transition period, our financial results have been supported by the continued growth of our emerging businesses. This strength helped drive a 130 basis point improvement in gross margin rate for the second quarter.”

The big anchor pulling GameStop’s sales down is the performance of new physical games and hardware. New games dropped 9.3 percent while sales of new hardware declined by 19.4 percent. Meanwhile, GameStop saw some growth in its digital business, which grew 17.9 percent to $158 million. That is nearly all from its Impulse digital-distribution store and its Kongregate web portal.

GameStop’s net earnings for the quarter amounted to $10.5 million compared to $21 million in 2012. That’s 9 cents earnings per share, which beats the previous estimate by 2 cents.

Raines credits expense control and improvements to the retailer’s gross margins for fueling the better-than-expected results.

“Of course, excitement continues to build for the upcoming new games and the launch of the PS4 and Xbox One,” said Raines. “As the global gaming leader, GameStop is uniquely positioned to capitalize on the new, innovative products coming to market.”

For the third quarter, GameStop is predicting a big boost to its earnings. The company estimates that it will report earnings per share in the 50 to 55 cents range. Games like Madden NFL 25 and Grand Theft Auto V will hit retail during GameStop’s third quarter.

The retailer is also inflating its full-year guidance from $2.90-$3.15 per share to $3-$3.20 per share. That’s due to the second-quarter beat and positive trends in new console preorders.


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