GameStop (GME) Q2 2016 Results

posted in: Earnings Call, Notes | 0

Mike Hogan – Executive Vice President, Strategy & Business Development

Accessibility of products is driving behaviour change in customers

“I think outside of the U.S. there really aren’t any specialty chains that specialize in collectibles and licensed merchandise. And so worldwide we’ve just added 6,000 stores to this market, making the product much more accessible to the average consumer who might not in the past have actually looked for this type of product… so what we’ve seen as we’ve expanded this product line, what we’re seeing people really shift their behaviors. And so as Game of Thrones will come out and people will come into our stores and buy 50 to 100 products for Game of Thrones parties to launch the premier. And so the culture and people’s behavior is actually starting to change because we’ve made the product so accessible.”

Tony Bartel – Chief Operating Officer

They have been taking advantage of the Pokemon craze

“…we capitalized on the global popularity of Pokémon GO by quickly identifying on social media our PokeStops and Poke Gyms. In addition, we also lured both Pokémon and players to our stores through coordinated and well disseminated effort. As a result, the 462 stores where we had Pokémon related events ended up more than doubling their sales of Pokémon related items during the promotional period.”

Hardware and software sales were down but are expected to pick up in H2

“…physical hardware sales were down 33% and software sales were down 18% during the quarter due to weaker innovation in the video game category. To put this into perspective, the top five games launched in Q2 of 2015 generated $253 million, while the top five games launched in Q2 of 2016 only sold $194 million, a 23% decrease….we expect this to turn positive in the back half of the year based on console and VR launches and the strong slate of games detailed on page 11 in the online material.”

Virtual Reality: High demand, low supply

“VR [Virtual Reality] is suffering from…a low production that is not meeting demand. But we see tremendous traffic when we run these events in our stores, and another element of just how much demand there is, we had the quickest sell-out of preorders in our history the last time we were able to put up PS VR for preorder, we were out literally in five minutes. So there is tremendous demand and in the back half of the year, as people come in, as they talk with our associates, they’re incredibly knowledgeable and certified in this, we think it will be a good traffic driver far beyond the sales that it will generate.”.

Rob Lloyd – Chief Financial Officer

On comps

“Comparable store sales decreased 10.6% for the quarter driven by the decline in hardware and software. U.S. comp was down 12.5% and international comps were down 5.9%. The negative hardware and software impact caused a comp decline of just over 12%. The positive impact of collectibles on the comp was approximately 2.5%. Omnichannel sales increased 16% during the quarter.”

Jason Ellis – Senior Vice President of Technology Brands

This quarter is on more than just the new iphone

“For this quarter in particular, iPhone is important to the quarter and obviously any Apple product launch will drive traffic to the stores. But thanks to the diversification in the retail stores, we’re also excited about the other products like DIRECTV with NFL Sunday Ticket, so there’s more than just iPhone in this quarter that will drive traffic.”