GameStop (GME) 2Q16 Earnings Call Notes

GME has diversified into digital, mobile, and collectibles as physical gaming has declined

“If we sit here and reflect as we think about the decline in physical gaming of almost 40% from its peak in 2008 and 2016, our strategy of diversification has paid off… our new growth businesses of digital, mobile and collectibles make GME a very compelling investment for the future as we grow 3% to 5% annually to 2019 as we projected at our Investor Day.” Paul Raines – Chief Executive Officer


Collectibles is a large, fragmented market that presents a growth opportunity

“it’s over $100 billion business. It’s North America. The piece that we’re focused on which is really sort of movies TV, video game, pop culture licensees, is around $11 billion… it’s highly fragmented. There’s no single player that has more than probably 10% or so share in this category. And its split up a bunch of various kinds of players from mass merch especially to retail to online, a lot of one man shops and so on.” Rob Lloyd – Chief Financial Officer


GME closed nine game store and acquired five hundred tech and mobile stores this quarter

“we closed a net of nine video game stores and now have 3,945 in the US and 2,009 internationally. We acquired 507 AT&T branded stores and opened a net of five Technology Brand stores, now have 1,566.” Rob Lloyd – Chief Financial Officer


Tech and mobile segment utilizes GameStop’s core competencies

“Technology Brands has been a deliberate focus on behalf of our leadership team to diversify GameStop’s revenues… Since its inception in October of 2013, Technology Brands has successfully leveraged GameStop’s core competencies in real estate expertise, multiunit management, buy, sell, trade and capital deployment to create one of the largest consumer technology specialty retail chains in America.” Jason Ellis – Senior Vice President of Technology Brands


As publisher, retailer, and digital partner, GME saw high margins on its first video game

“Playing the role of publisher, exclusive physical retailer and digital profit partner, GameStop is also proving a business model where it can invest smartly in new IPs and enjoy higher margins on the sale of these titles. Our pro forma gross margin for Song of the Deep is 63%. Game Trust has a strong lineup of games in development with innovative developers… These and future unannounced partnerships will continue to establish Game Trust as a leading disrupter in the $1 billion plus independent game market.” Tony Bartel – Chief Operating Officer