GameStop recently announced their Q2 2011 earning report. The company saw a slow growth with their 2010 yearly report. This time the news is more discouraging for investors, yet executives remain hopeful to see a strong third and fourth quarter.
The company took a hit with their total sales, seeing a 2.2% drop when compared to what this was at the same time in 2010. Robert Lloyd explained, “As we expected, software sales declined due to difficult comparisons to last year’s strong title lineup. As a result, total sales were $1.74 billion, a decrease of 3.1% compared to the second quarter of 2010. Total comparable store sales were down 9.1%, down 11% in the U.S. and down 5.4% internationally.”
The outlook appears much better for the second half of 2011. As J. Raines explained, “In terms of the back half of the year, we see a very strong lineup of new titles. Reserves for back-half titles are running significantly ahead of last year as pent-up demand is developing ahead of juggernaut titles like Modern Warfare 3, Battlefield: Bad Company 3, Gears of War 3, Assassin’s Creed 3 and Elder Scrolls V: Skyrim, and Batman: Arkham City.”
In addition, Gamestop executives expect to see further growth in the digital market, matching their strategy to purchase Impulse and offer DLC in their brick and mortar sites. As Tony Bartel said, “We continue to see strong growth in our digital initiatives, and I’m going to provide you with an update on our digital integration as well as give some commentary on the physical game opportunity that we see in the next two quarters. We remain on target to deliver at least 50% digital growth for the fiscal year as our digital revenue increased 69% in the second quarter and has grown 61% year-to-date. During the second quarter, console digital revenue grew 72%, while PC digital revenue grew 64%.”
Analysis: GameStop’s future is obviously going to be a little bumpy financially. It’s hard to argue that digital distribution is a force to be reckoned with, but they’re currently playing catch-up in the digital market while they try to keep their brick-and-mortar sites from becoming obsolete. This is a kill or be killed market, the latest casualty being Blockbuster when they tried to go head to head with Netflix. Will this happen to GameStop?
The short-term financial results tells us that they won’t fail anytime soon, especially with game publishers like EA, Activision, and Ubisoft constantly complaining about used games as that only helps to point budget gamers in GameStop’s direction. The year is only half over and it could swing one way or another for them. The yearly financial report will give us more of a measuring stick to see how things are going to work out for them, but if they can leverage their publishing partners to bring more online content to their stores, it will change how we look at GameStop and cement the future of their brick-and-mortar sites. A full transcript can be found here.