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GameStop Continues ThinkGeek Buildout While Closing Flagship Stores

GameStop apparently hit pay dirt with its 2015 acquisition of ThinkGeek, the go-to place for sci-fi-, anime- and comic-book-themed collectibles and clothing.

Amid slowing sales within its core gaming business, and plans to close as many as 225 flagship stores worldwide this year, the company is going full-bore into what some might describe as nerddom.

But nerddom pays. Think “The Big Bang Theory,” the CBS sitcom now in its 10th season — or ThinkGeek. According to GameStop’s fourth-quarter earnings report, sales within the collectibles division rose nearly 28 percent for the three months ended Jan. 28, to $212 million, driven by strong sales of Pokémon toys and apparel and the opening of 17 new showrooms.

The chain currently operates 86 locations, including 24 ThinkGeek shops in the U.S., and plans to add another 35 stores worldwide.

As GameStop CEO Paul Raines noted, looking back on 2016: “Our non-gaming business” — including a separate mobile and Apple retail division — “drove gross margin expansion and significantly contributed to our profits …[and] are expected to generate another year of strong growth” in 2017.

In contrast, he said, “The video game category was weak, particularly in the back half of 2016, as the console cycle ages.” That this year’s “new hardware innovation … looks promising” was the best Raines could muster.

Specifically, new hardware sales declined 29 percent, new software sales fell 19 percent and pre-owned sales slipped nearly 7 percent during the holiday quarter.

Sharing the spotlight with ThinkGeek is the 1,522-store mobile and Apple contingent, collectively called “technology brands.” Comprised of the Spring Mobile AT&T, Cricket and Apple-authorized Simply Mac chains, the unit posted a 44 percent sales spike in Q4, due largely to new store openings. But despite its superior square footage (with 65 more stores on the way this year), the technology group only modestly surpassed ThinkGeek in sales, with $256 million in volume last quarter.

All told, total GameStop sales slipped 13.6 percent to $3 billion for the quarter; comps for its titular GameStop stores declined 21 percent in the U.S.; and net earnings declined nearly 16 percent to $209 million.

The latter, the company said, was due in part to $56.5 million in charges for closing select tech brand locations in order to “optimize” the store portfolio after four years of rapid expansion.