The leader in gaming retail had a great 2014, but it’s not off to a great start in 2015.
GameStop reported the financial results for its fiscal fourth quarter as well as for its fiscal year, and the company missed market expectations for both its earnings and its sales. It reported revenues of $3.48 billion, which was around $120 million short of analyst estimates. It also had earnings per share of around $2.15, which was 2 cents shy of the market’s expectations. Looking into fiscal 2015, the company is providing weak guidance and plans to close several GameStop locations. This has the stock price down about 5 percent in after-hours trading.
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For 2014, GameStop generated $9.3 billion in total sales. That’s up 2.8 percent year-over-year compared to $9.04 billion in fiscal 2013. The brick-and-mortar retailer reported that sales of new gaming systems were up 17.3 percent from 2013 to 2014. This enabled GameStop to own a huge chunk of the market when it came to selling new PlayStation 4s and Xbox Ones.
“In our core video game business, we achieved our highest market share in history,” GameStop chief executive officer Paul Raines said. “With 28-percent share of next-generation hardware, 46-percent share of next-generation software and an estimated 42-percent share of downloadable content.”
That downloadable content was an especially important area of growth for GameStop. The company, which primarily deals in physical goods, has established itself as one of the primary drivers of digital add-on sales. Its retail outlets offer downloadable codes, gift cards, and other ways for players to pay for digital content in a store without needing to enter a credit card online.
Focusing on digital enabled GameStop to grow its sales in this sector by 41 percent in Q4 year-over-year. For the full year, digital revenue reached $948 million.
“For 2015, we are focused on maintaining and growing market share in physical and digital gaming,” said Raines.
Another area that GameStop continues to pour resources into is its technology brands. These include AT&T retail outlets Spring Mobile and Apple-product stores SimplyMac.
“Our technology-brands segment exceeded expectations,” said Raines. “[They contributed] 5 percent to our operating income and to our highest-ever annual gross margin of 29.9 percent, as we rapidly expanded the footprint of our AT&T wireless and Apple retail businesses. Together, core gaming and technology brands drove an 8-percent growth in operating earnings and 16-percent earnings per share growth.”
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Growing these non-gaming outlets while continuing to bring in more digital sales at its gaming stores will prove extremely important for the ongoing health of GameStop.
Looking ahead, however, GameStop is not anticipating an exceptionally strong 2015.
For the fiscal 2015, the company is expecting earnings per share between $3.60 and $3.80, and it’s expecting that its total sales could grow by 4 percent or, potentially, shrink by up to 1 percent. It is also planning to reduce its GameStop location count by around 3 percent.