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GameStop Q2 Financials: Sales up 25% to $1.73 Billion, PS4 & Xbox One Experiencing “Worldwide Demand”

August 22, 2014 Written by Jason Dunning

GameStop

GameStop has reported their financial results for the second quarter (ended August 2) of the fiscal year, and thanks in part to the new consoles, they saw a 25.1% increase in total global sales compared to the same point last year.

In total, GameStop reports $1.73 billion in sales during the quarter, with net profit at $24.6 million (up 134.3%). Looking at the breakdown, new hardware sales were up 124.8% due to “worldwide demand” for PlayStation 4 and Xbox One, new software sales were up 15.6% thanks to Mario Kart 8, Watch Dogs, and The Last of Us Remastered, the pre-owned/value category was up 5.5%, and digital sales were up 17.6% to $179.2 million, with platform currency, mobile, and Steam cards leading the way.

GameStop President Tony Bartel had this to say in the report:

We continue to sell over one half of all PS4 and Xbox One titles. The new console cycle is driving momentum. We’ve had four consecutive quarters of positive comparisons year-on-year and we expect that trend to continue.

CFO Rob Lloyd added:

The second quarter demonstrates the power of the new console cycle and all of our business units, including Technology Brands, positively contributing to the company’s sales and profits.

The back half of the year is filled with exciting games and products coming to market and I am confident that we are prepared to capitalize on these opportunities.

During the earnings call following the report, GameStop EVP of Strategic Business and Brand Development Mike Hogan mentioned that sales of the new consoles “continue to meet or exceed our initial estimates.” 

He added:

The attach rate is still building, as publishers release more new titles. GameStop’s attach rate is now above four, which is 75% higher than the rest of the industry. In the nine months since launch, category-wide sales of next-generation hardware are 70% higher than the same period following the PS3 and Xbox 360 launch, and GameStop’s sales are plus 140%. During the same time-frame, category-wide next-gen software sales are plus 26% versus the prior generation launch and GameStop’s are plus 103%.

Bartel then addressed the decreasing pre-orders being experienced right now:

What we are seeing on pre-sales, clearly, after recent announcements, we’ve seen a significant increase in pre-sales, but they are down from what we’ve seen in the past, we think for a couple of reasons. One, we think that people are still debating, as Mike shared with you earlier, what console they’re going to buy the game on.

And so what we have seen is, just because our pre-sales are down, it does not mean that our actual sales are down. And as Mike shared, we’re actually over-performing on all of the launches on Xbox One and PS4. So that’s a trend we’re continuing to see. So even though pre-sales are down a bit, we still believe they are the best barometer in the industry of what a game’s actual demand will be. It’s just that we have to buy a lot more relative to our pre-sales than what we’ve had to do in the past.

While GameStop may believe pre-orders are the biggest indicator for a game’s success, Activision believes it’s just one of the many metrics to look at.

[Source: Seeking Alpha, Games Industry, GameSpot (1), (2)]