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GameStop Still Bucks Recession

Grapevine, Texas — GameStop reported record sales and earnings for the first quarter, ended May 2, citing a 32 percent gain in used video game product sales.

Net earnings for the first quarter rose 13.4 percent to $70.4 million and included debt retirement costs of $2.9 million, vs. net earnings of $62.1 million for the year-ago period.

Total sales rose 9.2 percent to $1.98 billion, up from $1.81 billion in the prior-year period, led by a successful launch of the Nintendo DSi handheld gaming system and the releases of Resident Evil 5 and Street Fighter IV. However, the sell-through of these titles could not match the blockbuster success of Grand Theft Auto IV and Super Smash Bros. Brawl from the prior year, said the company.

First-quarter comparable store sales were lower than expected, declining slightly by 1.5 percent, due to recessionary effects in Europe and a slowdown of new console sales that occurred late in the quarter.

“During the quarter GameStop sustained its strong earnings growth momentum and exceeded earnings guidance despite less than planned comparable store sales,” said Daniel DeMatteo, CEO of GameStop. “Although new video game software sales declined by 2.8 percent, lower-priced used products grew a robust 31.9 percent, illustrating that value is becoming more important to our customers.”

The company also continues to capitalize on lower rent prices and opened 114 stores during the quarter. It also retired $50 million in senior notes and ended the quarter with $230 million in cash.

DeMatteo continued, “In the second quarter, like the first, we face very strong comparisons to the prior year period due to the unprecedented number of blockbuster titles released in the first half of 2008 and a significantly more brittle global economy. We do expect the back half of this year to be stronger than the first half due to a full and wide-ranging new title lineup. All together, this places us in a prime position to capitalize on the growth in the market in the fall and holiday seasons.”

Full-year comp-store sales are now expected to range from flat to up 2 percent, said GameStop.