Apple, Mobile Stores Driving GameStop's Growth - Twice

Apple, Mobile Stores Driving GameStop's Growth

Helped achieve record gross margins
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GameStop said its growing contingent of Apple and AT&T wireless stores is fueling the business amid mixed results in its core video game segment.

Grapevine, Texas — GameStop said its growing contingent of Apple and AT&T wireless stores is fueling the business amid mixed results in its core video game segment.

In a fourth-quarter earnings announcement, CEO Paul Raines said the retailer’s “technology brands” unit, comprised of the Simply Mac, Spring Mobile and Cricket store chains, “exceeded expectations” by contributing 5 percent to GameStop’s fiscal 2014 operating income and driving the company’s highest-ever annual gross margin of 29.9 percent.

GameStop owns 60 Simply Mac stores, which carry the full line of Apple products, and operates 63 Cricket stores, which sell AT&T’s Cricket Wireless prepaid services, devices and accessories.

The company also owns the authorized AT&T dealer Spring Mobile, whose 361 stores sell the carrier’s post-paid services and products.

GameStop has been rapidly expanding its technology brands chains and plans to add some 350 to 550 stores this year, including 163 former RadioShack locations that it picked up for Spring Mobile at auction.

In contrast, the company plans to close about 200 of its over 6,600 GameStop stores worldwide, a reduction of about 3 percent, as the gaming industry transitions from sales of physical media to software downloads.

During the November to December holiday period, combined mobile and CE sales rose 28 percent, driven by a 76 percent increase in technology brands revenue, due largely to Spring Mobile’s expansion.

But total sales for the fiscal fourth quarter, ended Jan. 31, fell 5.6 percent to $3.5 billion due to unfavorable currency fluctuations and a decline in new console sales, offsetting gains in mobile, CE and new software.

Same-store sales declined 1.4 percent in the U.S. and 2.6 percent internationally due to a tough prior-year comparison when Sony’s PlayStation 4 and Microsoft’s Xbox One platforms were introduced.

In contrast, digital receipts from downloadable content and mobile digital sales rose 41.4 percent to $368.8 million.

Net earnings for the quarter increased 10.7 percent to $244.1 million, including one-time charges and tax benefits.

For the full fiscal year, new video game software sales fell 11 percent, sales of new hardware rose 17.3 percent, and sales of pre-owned and “value” products rose 2.6 percent.

Looking ahead, chief financial officer Rob Lloyd projected mid-single-digit sales growth for new software in the current fiscal year.

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