The world’s largest video game and entertainment software retailer, GameStop Corporation (GME), is all set to unleash its much awaited Nintendo 3DS on March 27, 2011 at over 3,000 of its U.S. stores.
The company is heavily betting on this new 3D system as it vows to provide a whole new 3D experience to the game players. GameStop took a comprehensive promotional activity for its launch, which includes midnight launch events, early store openings and product demos.
GameStop has announced that more than 800 of its stores will open at 12:01 a.m. across the United States and more than 2,400 stores will open early at 9:00 a.m. on launch day to sell the Nintendo 3DS system. The company is giving a credit of $50 to $100 to those customers, who trade in Nintendo DS Lite, DSi or DSi XL systems towards the purchase of a Nintendo 3DS system.
Moreover, GameStop is enticing customers, who provide a review on its website after its demo event slated on April 02, 2011, by giving them a chance to win a Nintendo 3DS and a $500 GameStop gift card.
In a separate story, the company reported its fourth-quarter 2010 results. The quarterly earnings of $1.56 a share came in line with the Zacks Consensus Estimate and rose 20.9% from $1.29 earned in the prior-year quarter driven by digital offerings, power up rewards loyalty program and e-commerce inventiveness.
GameStop’s fourth-quarter 2010 total revenue climbed 4.8% from the year-ago quarter to $3,692.8 million, but fell short of the Zacks Consensus Estimate of $3,710.0 million. The retailer hinted that comparable-store sales inched up 2.6% during the fourth quarter.
By sales mix, new video game hardware sales went up 5.9% to $781.4 million, whereas sales of new video game software inched up 2.1% to $1,593.4 million. Sales of used video games registered a growth of 3.7% to $805.6 million.
GameStop’s gross profit for the quarter expanded 3.4% to $903.7 million, despite of a 5.3% increase in cost of sales, whereas gross margin reduced 30 basis points to 24.5%. Operating income rose 8.1% to $375.7 million, whereas operating margin increased 30 basis points to 10.2%.
In its guidance for first quarter 2011, the company anticipates net sales to increase in the range of 6.0% to 8.0% with an increase of 4.0% to 6.0% in comparable-store sales. GameStop anticipates earnings in the range of 53 cents to 55 cents per share.
For fiscal 2011, the company anticipates net sales to increase in the range of 6.0% to 8.0% with a rise in comparable-store sales by 3.5% – 5.5%. GameStop expects earnings in the range of $2.82 to $2.92 per share.
Currently, we have a long-term ‘Neutral’ rating on GameStop. Moreover, GameStop, which competes with Best Buy Co. Inc.(BBY) and Amazon.com Inc. (AMZN), holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ recommendation, also correlating with our long-term view.
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