Gamestop 4Q13 Earnings Call Notes

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A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Must sustain a greater pace of change than the environment

“we believe that GameStop has to maintain a higher rate of internal change than the environment that surrounds us. And we believe that philosophy has served us well during the last few years of declines in our category.”

Big comp growth driven by new consoles

“In the fourth quarter, total sales increased 3.4% from the fourth quarter of 2012 to $3.68 billion driven by the successful launch of the PlayStation 4 and the Xbox One. Comparable store sales for the quarter increased 7.8%.”

Expecting continued growth in 2014

“For the full year, we expect revenue to increase between 8% and 14% and comps to increase 6% to 12%. Sales and comp growth will again be driven by hardware sales. However we also expect sales growth in each of our categories. Given the growth we expect during the year, we expect full year net income to grow between 12% and 22%.”

Seeing new investment in consoles with refresh

“as consoles return to the category, we’re seeing a lot of new investment. That’s very important because for years, we watched investment flow out of consoles into other forms of gaming and electronics. And now you’re seeing, right Tony, a tremendous amount of projects there”

Plan has been to close 2% of stores per year

“we would begin to consolidate our store footprint in United States by 2% a year. And so this is consistent if you go back and look at our scripts from last year and the year before.”

Value buyers come in in the first 2-3 years of a console cycle

“historically the pre-owned business will have very strong growth in the first two to three years of a console cycle. There is going to be a lot of demand from the value people. So, the new game buyer will be buying all the new consoles and software. There is a value buyer that comes back into GameStop and that value buyer we want to serve them more broadly than we ever have.”

Power up rewards program

“for years we’ve been only in this video game business and we’ve done incredible job, but we look around and say as PowerUp Rewards becomes as dominant CRM program people are coming to our door going, hey, can you distribute some of our other technology products and it’s working pretty well”

Seeing adoption of consoles among more than just core gamers

“We still see really strong demand and it’s a very, very broad group. So, it’s not just a core gamer here, it’s definitely broadened across all of our segments.”

Full game download still a very small percent of our business

“here is no doubt that there is a lot more going on from a digital sharing perspective as I’ve referenced by our PS4 sales. We are seeing an uptick in the sale of digital games at GameStop. The most, the highest growth item now that we’re seeing is the content that is now pretty well fold with every significant launch that takes place. So we are seeing an ever increasing amount of DLC sold. Our penetration of DLC sold on every launch is increasing. So, we see a lot of that. Obviously we’re doing a lot to drive the identification of that over. But in terms of full game download that still remains a very, very small percent of our business. And so, we see it more on the downloadable content side.”

We welcome full game downloads

“we like the idea, right, of selling full game digital content, we’re pretty good at it at this point. But I would say it’s still like technology versus chronology. And don’t forget, the games are getting bigger.”